Do you need more products? Stocking too many? How QuickBooks Online can help solve both problems
Maintaining a healthy inventory of products to sell is always a balancing act. It usually involves plenty of trial and error when your business is young. If you’re selling unique products that you’ve created yourself, it’s not so hard. You make one, you sell it, and your inventory is gone.
It gets trickier if you’re mass-producing the same item or buying items in bulk or wholesale. How many will you be able to sell? Your first estimates may be wildly off base. You take those early losses and try to make better buying decisions. You want to have enough products in stock that you don’t have to turn away sales, but you also don’t want to tie up a lot of money in excess inventory that isn’t moving.
As a business manager, you must learn the sweet spot for every item you stock. It can take months or even years. QuickBooks Online can’t make those buying decisions for you, but it can warn you when you’re running low and have too much on hand that isn’t selling well.
Here are five ways to improve that delicate balance.
Make sure all of the inventory tracking options are turned on.
Click the gear icon at the top right and scroll to Sales on the Account and Settings page. In the Product and Services section, ensure all options are set to On (we’ll get to price rules later). Be sure to click Done when you’re finished.
Make sure to complete all the details on inventory product records.
We strongly urge you to complete all fields in inventory item records.
We’ve described the process of creating inventory item records before. Click the gear icon at the top right—select Lists | Products and Services. Click New on the upper right and Inventory on the panel that slides out from the right. You’re only required to complete three fields here: Name, Initial quantity on hand, and As of date. This allows you to include those item records in transactions. QuickBooks Online will subtract items when you sell them and keep your inventory level current.
In the above image, the Reorder point field is critical. QuickBooks Online will let you know when the inventory level for that product drops to the number you specify. When your cursor is on an invoice’s QTY (quantity) field, the three numbers pictured above will appear in a pop-out window (Quantity on PO automatically appears in the record based on your current purchase orders). Be sure you pay attention to this information when you’re selling products.
Set up flexible pricing.
There may be times when you want to temporarily lower the price of a product or products because they’re not selling. It could be seasonal; you expect sales to pick up later. You can use QuickBooks Online’s Price rules. This tool allows you to discount certain products for a specified time.
Let’s say you’re overstocked on fountain pumps and want to discount them monthly to see if you can reduce your inventory level. Click the gear icon again and select Lists | All lists | Price Rules. Click Create a Rule and give it a Rule name. Price rules apply to all products and all customers by default. So you’d leave Customer | All customers as is. Scroll down under Products and Services and click Select individually. Under the Price adjustment method, select the Fixed amount. Choose Decrease by, select 12, and then select No rounding in the following two fields. Enter the Start date and End date (optional).
You can create Price rules to temporarily decrease (or increase) prices for some or all customers.
Click +Add product or service, then click the down arrow in the field under Products in the lower half of the screen. Scroll to Fountain Pump and select it. Your Adjusted Price should appear in that column. Click Apply rule and then save it. This price will appear automatically when you create an invoice, though you can override it or delete it on the Price Rules page.
Use the site’s inventory reports.
QuickBooks Online offers excellent templates for inventory reports that you should run regularly. We discussed how the site alerts you to low stock levels when creating invoices. But it would help if you studied the big picture on occasion. These reports are:
- Inventory Valuation Summary. Transactions for every inventory item and how they affect quantity on hand, value, and cost
- Inventory Valuation Detail. The quantity on hand, value, and average cost for each inventory item
- Physical Inventory Worksheet. This worksheet lists your inventory items, with space to enter your physical count to compare it to the quantity on hand in QuickBooks Online. QuickBooks Online allows you to adjust inventory levels, but this should be done carefully. We can advise you on this.
You can also visit the Products & Services page, which displays a detailed profile of each item. If you’re low on stock or entirely out, that information will appear at the top of the page.
We can’t advise you on the inventory levels you should be maintaining. Over time, this will become easier to gauge. But we’re here if you have questions about inventory management mechanics or any other element of QuickBooks Online.
