How to get started with small business inventory software with QuickBooks

Tue | April 2023

A shift to digitalization has brought about many changes, including how companies manage their inventory and ensure they have the right products at the right time. So, whether you're a startup or a medium size business, you should know that digitalization is no longer an option but a necessity to stay competitive.

If you've been manually counting your stock, spending countless hours wandering your warehouse or updating tiresome spreadsheets, we're excited to introduce you to small business inventory software with Quickbooks. This powerful tool offers the real-time information required for product development and purchasing decisions.

In the following sections, we'll explain some of the benefits of using QuickBooks for inventory management and provide a step-by-step guide on how to get started. By the end of this article, you'll better understand how digitalization can benefit your business and how QuickBooks can help you achieve your inventory management goals. Are you ready to take your inventory management processes to the next level? Let's get started.

What is inventory software?

Inventory software is a computer program or system that gives companies a comprehensive view of each product or raw material. For example, inventory software has planning tools and real-time stock location data. In other words, you can manage the inputs and outputs of your products, what quantities there are, and what is their access and distribution.

In short, having inventory software allows you to set reorder points, receive alerts when inventory levels are low, and generate reports to analyze your business performance. Some of the most popular inventory management software are Quickbooks, Fishbowl, Zoho Inventory, and TradeGecko.

In the following sections, we'll show you what QuickBooks is, how it works, and its various features and functionality.

Inventory management with QuickBooks

QuickBooks is a popular accounting software with features enabling businesses to track inventory levels, monitor sales, purchase orders, and generate reports. To use inventory management features in QuickBooks Online Plus, businesses must first set up an inventory item list, including all products that the company buys and sells. This list includes information such as the item name, description, cost, price, and quantity on hand. 

Once you set up the inventory list, you can track inventory levels in real-time, monitor sales and purchase orders, and generate reports. QuickBooks also includes features such as automatic reordering and inventory valuation, which help businesses manage inventory more efficiently and accurately. In the following sections, we will describe how to use inventory software with Quickbooks.

How do you do inventory control in Quickbooks?

Inventory control in Quickbooks is straightforward; you will first need to enable the feature and then set up the inventory products you have. In the following sections, we will guide you through setting up and using QuickBooks for real-time inventory tracking. We will start with the basics of inventory tracking, including setting up inventory items and tracking inventory levels.

Enable the inventory management feature 

To start using Quickbooks for managing inventory, you must acquire the Plus or Advanced Plan to access these features. QuickBooks Online Plus and Advanced have various reports to make inventory tracking easy. Once you set up Quickbooks Online Plus, make sure to turn on the inventory tracking setting to add your inventory: 

1. Go to Settings ⚙ and select Account and Settings.

2. Click on the Sales tab.

3. Select Edit in the Product and Services option and turn on all the options below.

4. Click on the Expenses category.

5. Look for the options Purchase Orders and Bills and Expenses.

6. Enable all the options under each one.

7. Click on Done to save the changes.

Once you have enabled inventory tracking, you can start tracking your inventory by adding new products or services, creating purchase orders, and recording inventory adjustments.

Set up inventory items in QuickBooks

To set up inventory items in QuickBooks, including creating and editing item names, descriptions, prices, and units of measure, follow these steps:

1. Open QuickBooks and go to the Lists menu at the top of the screen.

2. Click on Item List to open the item list window.

3. Click on the Item button at the bottom of the window and select New to create a new item.

4. In the New Item window, select the type of item you want to create ("Inventory," "Non-Inventory," or "Service") and enter a name for the item in the Item Name/Number field.

5. Enter a description of the item in the Description field.

6. Choose a unit of measure for the item (such as "each," "box," or "hour") and enter the price for the item in the Sales Price/Rate field.

7. If the item is taxable, select the Taxable checkbox and choose the appropriate tax rate from the drop-down menu.

8. If the item is an inventory item, enter the cost of the item in the Cost field and the quantity on hand in the On Hand field.

9. Click Save & Close to save the item and close the window.

A business can better manage its inventory and improve efficiency by setting up inventory items in QuickBooks with exact names, descriptions, prices, and units of measure.

Creating Products and Services

To create products and services for inventory in QuickBooks, follow these steps:

1. Go to Settings ⚙ and select Products and Services.

2. Click the New button to create a new product or service.

3. Enter the product or service name, description, and price.

4. Check the box that says "I track quantity on hand" to enable inventory tracking for the product or service.

5. Set the initial quantity on hand for the product or service.

6. Assign the product or service to an income account.

7. Save the changes.

Managing Products and Services

To manage or edit products and services for inventory in QuickBooks, follow these steps:

1. Go to Settings ⚙ and select Products and Services.

2. Click on an existing product or service to edit it.

3. Update the product or service name, description, price, or quantity on hand.

4. Assign the product or service to an income account.

5. Save the changes.

Setting Reorder Points

To set reorder points for inventory in QuickBooks, follow these steps:

1. Go to Settings ⚙ and select Products and Services.

2. Click on an existing product to edit it.

3. In the Reorder Point field, enter the minimum quantity of the product you want to keep on hand.

4. In the Preferred Vendor field, select the vendor you wish to order the product from when inventory levels fall below the reorder point.

5. Save the changes.

Managing Vendors

To manage vendors in QuickBooks, follow these steps:

1. Click on the Expenses tab from the QuickBooks dashboard and select Vendors.

2. Click on the New Vendor button to add a new vendor.

3. Enter the vendor's name, address, and contact information.

4. Assign the vendor to an expense account.

5. Save the changes.

Recording inventory transactions

In QuickBooks, recording inventory transactions such as sales, purchases, and adjustments is crucial for accurate inventory management and financial reporting. Here are the steps to record different types of inventory transactions using QuickBooks Online Plus:

Recording a Purchase

To create a Purchase Order or Bill in Quickbooks, follow these steps:

1. From the QuickBooks Online Plus dashboard, click on the + Icon and select Bill or Purchase Order.

2. Enter the vendor name, purchase date, and payment terms.

3. Enter the product name, description, quantity, and cost per unit.

4. Select the appropriate account for the purchase (e.g., Cost of Goods Sold).

5. You can also assign a class or location to the purchase using these QuickBooks features.

6. Click Save and Close to save the transaction.

Recording a Sale

To record a Sale in QuickBooks, follow these steps:

1. Create an Invoice: Click the + Icon and select Invoice.

2. Enter the customer name, sale date, and payment terms.

3. Enter the product name, description, quantity, and sale price per unit.

4. Select the appropriate account for sale (e.g., Sales).

5. Click Save and Close to save the transaction. 

In the previous sections, we learned the basics that you could do with the Quickbooks tool to manage your business inventory. However, more functionalities exist to explore, such as: generating inventory reports and integrating QuickBooks with other applications (such as e-commerce platforms and point-of-sale systems). 

In conclusion

Regardless of size, digitalization has become necessary for businesses to remain competitive in the current economy. With the introduction of inventory management software, such as QuickBooks, managing inventory has become much more accessible. With these benefits in mind, it's time to embrace technology and use inventory-tracking software to optimize operations. 

A 2022 study from the U.S. Chamber of Commerce revealed that since 2020 small companies incorporating technology platforms are likelier to grow their sales and profits, create jobs, and remain competitive in today's economy. Are you looking to take your business to the next level with digital transformation but need more capital to invest? Look only as far as One Park Financial. You can get pre-qualified for business funding if your business is at least three months old and generates $7,500 monthly revenue.

Ready to take the first step toward your digital transformation journey? You'll only have to complete our online qualification process, and one of our agents will start your process today! 

Disclaimer: The content of this post has been prepared for informational purposes only. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. Consult with your tax, legal, and accounting advisor before engaging in any transaction.