Training Guide for Accoun ng Professionals. Tracks for Accounting Professionals. Mastering Inventory in QuickBooks Enterprise

Transcription

1 Training Guide for Accounng Professionals Tracks for Accounting Professionals Mastering Inventory in QuickBooks Enterprise

2 Mastering Inventory in QuickBooks Enterprise Solutions

3 Table of Contents About the Author... 3 About this Course... 4 QuickBooks Inventory Lineup... 5 Understanding Average Cost in QuickBooks... 6 Inventory Reporting... 8 Enhanced Inventory Receiving Why Enhanced Inventory Receiving Turning On Enhanced Inventory Receiving Using Enhanced Inventory Receiving QuickBooks Enterprise Solutions Advanced Inventory Features of Advanced Inventory Serial or Lot Number Tracking FIFO (First In First Out) Costing Barcode Scanning When to Step out Beyond QuickBooks Review & Takeaways

4 About the Author Mario Nowogrodzki, CPA.CITP Principal, MENDELSON CONSULTING Mario Nowogrodzki is an information systems consultant and instructor and the founder and principal of Mendelson Consulting, which specializes in QuickBooks and information technology consulting services. He is a frequent author and instructor of QuickBooks and technology topics and a contributing author and speaker for Intuit, The Sleeter Group, and the National Advisor Network. A leading figure on the national QuickBooks scene, Mario was selected to be a charter member of the Intuit Solution Provider program and was selected to serve on the Intuit Solution Provider Program Advisory Council for three consecutive terms (longest ever tenure). Mario is a Certified Public Accountant since 1992 and has received the Certified Information Technology Professional (CITP) designation from the American Institute of CPAs. As an Advanced Certified QuickBooks ProAdvisor, Mario s firm was recognized as Killer VAR and VAR Stars, prestigious distinctions awarded by Accounting Technology magazine and Bob Scott s Insights acknowledging commitment and character as a value added reseller. He was also selected as a Technology Pacesetter by Accounting Today magazine recognizing reputation among peers and participation on advisory boards and speaker panels at industry events, and is a three time recipient of the Top Technologist award by the Sleeter National Consultants Network. Most recently, Mario was named to the Intuitive Accountant Top 100 ProAdvisor list, an exclusive list of prominent professionals honored for their accomplishments and leadership in the field of QuickBooks consulting. In addition to working with QuickBooks users and ProAdvisors, Mario provides information technology consulting services to accounting firms and other businesses helping them to serve clients better and manage their practice more efficiently. You may reach Mario at mario@mendelsonconsulting.com. Editor Carol Oliver, Woodard Events Technical Editor Mary Longacre, Custom Accounting Solutions 3

5 About this Course This course covers inventory management specific to QuickBooks Enterprise Solutions including the addon application Advanced Inventory. The course provides best practices for setting up inventory and processing transactions using Enterprise Solutions and Advanced Inventory. 4

6 QuickBooks Inventory Lineup The following features are available in QuickBooks Enterprise Solutions to help with your inventory needs; the first 3 are also available in QuickBooks Premier: Multiple Units of Measure / Unit of Measure Conversion Assemblies, Subassemblies, Variable Bill of Materials Inventory Center Enhanced Receiving Advanced Inventory (additional cost) 5

7 Understanding Average Cost in QuickBooks For purposes of Inventory valuation and Cost of Goods Sold calculation, QuickBooks uses the Average Cost method. Because of this, it is important to state some baseline concepts: Weighted Average To be specific, QuickBooks uses the weighted average cost method. This takes into account the total of the different costs of each unit on hand and divides it by total units on hand. In other words, it uses the formula: Total purchase cost of items in inventory available for sale divided by total number of units available for sale. So items with more units on hand at a specific cost weigh more in the calculation of average cost than others. Perpetual Inventory Inventory on hand quantity and value are updated continuously. It provides a highly detailed view of changes in inventory and allows real time reporting of inventory quantities and value. Inventory value is tracked with every inflow and outflow of goods. This is the opposite of Periodic Inventory, which only updates ending inventory balance and cost of goods sold after a physical inventory count is conducted. Date/Time Sensitive Hyper sensitive, actually. Pay very close attention to the dates of inflow/outflow transactions or you could affect reports in unexpected ways. If you properly enter inflow transactions before outflow transactions, even if dated the same day, inventory costing calculates properly. But if you are correcting past inventory transactions, make sure to date the inflow transaction at least one day prior to the outflow transaction, not the same date. What happens when you go negative Before considering what happens, you must think, exactly how is this actually occurring? You cannot record a sale for something you do not possess. By default, QuickBooks allows this. This adversely affects reporting, especially if your very first inventory transaction for an item puts it in the negative. New for 2015, QuickBooks now provides a preference for disallowing negative inventory: 6

8 Merging Items NO! Before doing this, consider that you are about to forever alter the history of the items about to be merged. Because of different purchase/sale (inflow/outflow) activity of each item, you would alter the calculated cost history of both items, likely affecting Inventory Asset and Cost of Goods Sold in historical financial reports. 7

9 Inventory Reporting A few important considerations about inventory reporting: Inventory Valuation Summary This is one of your key inventory reports; it shows Inventory Part and Assembly Items onhand quantities and values. Items marked inactive will not show up on this report, even if they have quantity and/or value on hand. This can be used as the inventory subsidiary ledger, that is, the underlying detail of Inventory Asset account(s) on the General Ledger or Balance Sheet. Comparing Inventory Details to G/L Because it is the Inventory Asset subsidiary ledger, the total Asset Value on an Inventory Valuation Summary report should match the Inventory Asset balance on a Balance Sheet (for the same date instance). The numbers above should match the numbers in the report below note the discrepancy in this example. 8

10 Watch for Inactive Items If you compare the reports and they do not match, inactive items could be a reason why. Remember that the Inventory Valuation Summary report does not include inactive items. Watch for No Item in G/L detail reports Another possible cause for the reports not matching could be transactions that affect the Inventory Asset account(s) were entered in a way that did not affect Items. Examples are Vendor Bills where the Expense tab is used to post to an Inventory Asset account or Journal Entries that post to an Inventory Asset account. To find which inventory transactions use No Item, on a G/L summary report such as a Balance Sheet, drill down on the Inventory Asset value; on the resulting Transaction Detail report, click the Expand button on the report toolbar, click on the Total By dropdown menu and select Item Detail. Transactions that use No Item will be listed at the end of the report. It is important to remember never to use an Inventory Asset on a Journal Entry, as Journal Entries do not allow the selection of Items. See our $5,000 discrepancy below: 9

11 Enhanced Inventory Receiving Enhanced Inventory Receiving (EIR) specifically improves how you receive and pay for Inventory items in QuickBooks Enterprise Solutions. This feature is not available in other editions of QuickBooks. This feature does not require the Advanced Inventory subscription. Why Enhanced Inventory Receiving Before EIR, Item Receipts and Bills were consolidated into the same transaction in QuickBooks. This caused many real life issues in QuickBooks. In business, it is not uncommon to receive multiple Item Receipts and receive only one related Vendor Bill. Also, it is not uncommon to have only one Item Receipt yet receive multiple Vendor Bills against that one Item Receipt. In both of these situations, QuickBooks basically treated Inventory Receiving and Accounts Payable as a single transaction, which caused inventory and financial reports to change depending on when you actually received the Item and actually received the Vendor Bill, if both were not received at the same time. Before EIR, when you received an Item you ordered: For example, you received the Item on December 15; but you have not received an actual bill yet. 10

12 If you look at a Vendor Balance Detail report, notice how there is a total amount for the Item Receipt. Even though this may or may not be the actual bill amount that you owe, QuickBooks reports that you in fact, already owe for this item in Accounts Payable: This happened because, behind the scenes, even though you are only receiving the Item, Accounts Payable was used. Here is the Transaction Journal report to show the behind the scenes accounting: The potential problem is that you have not actually received a Vendor Bill yet, and this should perhaps be recorded as an accrued purchase instead of actual Accounts Payable. Look at what happens when you actually receive the Vendor Bill later: Notice that your Item Receipt is gone, replaced by the Vendor Bill. And notice that the transaction date has been changed to the date of the Vendor Bill, which could be one cause of negative Inventory quantities if sales occurred before the date of the bill. 11

13 The potential problem is that the Item Receipt date is being changed to the Vendor Bill date. Potentially the amount could also change. The problem can be worse if the Item Receipt / Vendor Bill were to span different fiscal years. With EIR, these real life issues are resolved. Item Receipts and Vendor Bills are treated as two separate transactions that can have different dates and the same or different cost amounts. So for example, when you enter an Item Receipt dated December 15 th and receive the Vendor Bill on January 5 th, the Item Receipt transaction does not get moved to January 5 th. Accounting wise, to handle these accrued purchases, QuickBooks uses an Other Current Liability account called Inventory Offset behind the scenes. When you enter an Item Receipt, the Inventory Asset account is debited and the Inventory Offset account is credited. When you enter the Vendor Bill, Inventory Offset is debited and Accounts Payable credited. Turning On Enhanced Inventory Receiving Pay close attention as you activate the EIR feature because QuickBooks tells you some important things during the process. To turn the feature on, go to Preferences from the Edit Menu: QuickBooks requires that you make a backup of the company file as part of the process. Turning on EIR is irreversible once this feature is turned on, it cannot be turned off. If you want to go back to before EIR, you would have to restore to a previous backup. Depending on the QuickBooks file size, this process could take a long time. It will make the QuickBooks file (QBW) larger, because now every Vendor Bill that had Items in it is split into an Item Receipt and a Vendor Bill, and the changes being made will affect closed periods. 12

14 QuickBooks warns you about all these and more: Once you initiate the process, you will see a window like this for a short or long period of time depending on the size of the file and the number of transactions that have to be changed: At the end of the process, QuickBooks tells you: The process was successful and how long it took. What happened during the update of the file. Which accounts were affected and by how much. 13

15 As a result of turning on Enhanced Inventory Receiving, the Home Screen will change to this: Notice the single Receive Items icon, instead of the Receive Inventory and Enter Bills Against Inventory icons normally found when you do not have EIR turned on. 14

16 Using Enhanced Inventory Receiving Now you can properly track when you receive Inventory and when you get the Vendor Bill as the separate transactions they are: Notice the Item Receipt date. Notice the lack of an amount. The value has not been determined because a Vendor Bill has not been received. If you look at Vendor Balance Detail report, it is not listed. Accounting wise this is correct because you have not incurred the Accounts Payable. Behind the scenes QuickBooks is now using the Inventory Offset Account, not Accounts Payable: 15

17 When you receive the Vendor Bill on a later date, it will be a separate transaction: Notice the proper date for the Vendor Bill. Notice the amount recorded. Only now it posts to Accounts Payable. This is a more accurate reflection of what actually happens. You still have the ability to find out when you received the items if needed. Running a Purchase by Vendor Detail report for the desired date range: 16

18 You then see this report (this one is filtered by name to show only the one Vendor): You can see that you received the Item on December 15 th. You can see that you entered the Vendor Bill on December 31 st. 17

19 QuickBooks Enterprise Solutions Advanced Inventory The Advanced Inventory module adds the following functionalities to QuickBooks Enterprise Solutions: Multiple Inventory Sites Gives the ability to see how many items are on hand, on Sales Orders or Purchase Orders and even reorder points for each inventory location. Through reporting, it will even automatically calculate which items need restocking and where. Bin Locations Allows you to track inventory items down to the bin location level in one or more warehouses. You can see quantities and Serial or Lot Numbers for each bin location. For efficiency, you can sort Pick Lists or Item Receipts by location. Lot Number or Serial Number Tracking Provides the ability to enter Serial or Lot Numbers at the time of purchase, transfer, or sale for more accurate and reliable inventory tracking. FIFO Costing You have the flexibility to track inventory using First In First Out (FIFO) costing. Bar Code Scanning Increase efficiency and reliability for inventory data entry by scanning items and serial numbers without touching a keyboard. Advanced Inventory brings some extra capability to handling inventory in QuickBooks Enterprise Solutions. It is offered at an additional cost and is only available to Enterprise customers who are current with their Full Service Plan, or who have a QBES subscription. Once purchased, you can access all these through Preferences from the Edit menu: 18

20 When you click the Advanced Inventory Settings button, you manage each of the functions through the tabs across the top: Features of Advanced Inventory Multiple Inventory Locations As the name implies, this allows you to accurately track inventory across multiple warehouse sites and multiple locations within those sites. When you turn on Advanced Inventory, pay attention to how you set your preferences depending on how detailed you want inventory locations to be: 19

21 Multiple Inventory Sites Note that you can be warned about duplicate transfers, AND Be warned if you do not have enough of the Item, OR Blocked from selling inventory items where you do not have enough You can also go deeper into exactly where your items are by tracking the Bin Location within the Inventory Site and retain your warnings on if any are there. Once upon a time (before Advanced Inventory), if you had multiple inventory locations you could use Class tracking or make sub items, or even sub accounts on the Chart of Accounts, to keep track of where inventory was or where it was coming from. Now with Advanced Inventory, you can do this using Inventory Sites and Bin Locations. From the Lists menu, access your Inventory Site List: 20

22 Here you can create Sites and Bin Locations: Bin Locations are in essence sub Sites. In the screenshot above, notice that there is a Distribution Center Site with many sub sites or Bin Locations. The real power of this feature comes from the level of detail in the setup. Not only can you track where an Item is (Inventory Site), but where the Item is physically located (Bin Location) in the Site. During the setup of the Inventory Site or Bin Location you see this window: If you enable the checkbox is a bin within site, you transform this Inventory Site into a Bin Location, or in essence a sub site. 21

23 In the example above, Name is the Bin location of the item; A2S3 could represent Aisle 2, Shelf 3 (which we put in the Description for extra reference). With Advanced Inventory you can now answer the questions of not only how many but where. When you access the Item list: For the highlighted Item (Unit RC 1/2HP) we have 29 units on hand; the same count information we have always been able to attain. With Advanced Inventory, we can now also see the where or Inventory Site and Bin Location. 22

24 Further, in the Activities menu at the bottom of the screen, you can go a little deeper by looking at the Current Availability: Here we see a deeper level of detail: 1. We still show 29 total on hand, but now we see the quantity at each Inventory Site; in our example, 21 at Distribution Center, 6 in Atlanta, and 2 in San Jose. 2. We see the breakdown for On Hand, on Sales Orders, and Reserved for Assembly transactions. 23

25 3. We can even see if there are any on Purchase Orders by using the Show >> / Hide Details<< button: The ease of use is evident as well, when using Items on sales transactions: 24

26 On Invoice transactions, QuickBooks will require the user to fill out the Site and Bin columns to maintain accuracy. Not filling in those columns will get a friendly warning: When you need to move inventory from one Inventory Site to another or even from one Bin Location to another within the same Site, it s a simple as doing an Inventory Transfer, also found under the Inventory menu: You choose the Inventory Site where inventory is transferred from and the Inventory Site the inventory will be transferred to, then select the Items you want to transfer, including their Bin Locations. 25

27 How do you know if you are about to run out of an item? Maybe you are just running low and need to reorder? QuickBooks lets you set a Global Reorder point in addition to having Site reorder points. You set Site Minimum and Maximum points from Inventory Site list, Activities Menu: To set an Item s Reorder Point, edit the Item from the Item list: Here you set the Global Reorder Point. You can also click the Inventory Site Info button for a shortcut to set the Site Reorder Points. There are two things you need to know about Reorder Points: Site Reorder Points do not add up to calculate an Item s Global Reorder Point. For example, if you have 2 locations and you set the reorder point for each location at 5, it does not set the global 26

28 reorder point of the item to 10. You set the Item Global Reorder Point independently of the Site Reorder Points. With Multiple Inventory Locations, while you can set the Reorder Point for an Item for the entire Site, it does not go down to the Bin Location level. Meaning you can set QuickBooks to show you to reorder when you get down to 10 for a specific Site, for example, but not when you get down to 10 in a specific Bin Location. 27

29 Serial or Lot Number Tracking If you want to use this feature, you need to make a choice between Serial Number or Lot Number tracking, because you cannot do both. You make the choice through the same Advanced Inventory Settings button in Preferences via the Edit menu: In making the choice between Serial or Lot Numbers, here are some things to consider: Use Serial Numbers if you: Buy and sell Inventory items that have unique Serial Numbers. Need to track which customers bought specific Serial Numbers. Need to track what Serial Numbers are in stock. Need a report that shows what Invoices relate to specific Serial Numbers. If you have item specific unique number tracking needs, this is the option for you. 28

30 Use Lot Numbers if you: Purchase or manufacture items in Lots or batches. Need to track which customers bought Items from specific Lots. Need a report that shows what invoices are related to Items from specific Lots (for example, for warranty or recall purposes). If tracking what batch or group the Items come from is critical, then this is the option for you. With either Serial or Lot Numbers, you now have the ability to track Serial/Lot Numbers on certain forms in QuickBooks. For purchase transactions, you can enable using Serial/Lot numbers on Item Receipt, Vendor Bill, Credit Card Charge, and Check transactions. For sales transactions it is used on Invoice, Sales Receipt, and Credit Memo transactions. Because they deal with physical inventory movement, Serial/Lot Numbers are also used on Inventory Adjustment/Transfer as well as Build Assembly transactions. 29

31 Here is the field shown on an Item Receipt: The field is also available when the items are sold on Invoices & Credit Memos: When using Sales Orders and Pending Invoices, the Serial/Lot Number field is available as well on those transactions. 30

32 Before we jump into reporting for Serial/Lot Numbers, note that if you have existing Items on hand that do not have Serial or Lot Numbers, you can go back and add them. So when you turn on Serial/Lot Number tracking, you should update existing inventory on hand with Serial or Lot Numbers. You want your reports to be accurate and meaningful, so make sure all the data is properly entered and complete. This is accomplished through the Adjust Quantity/Value on Hand window in QuickBooks. From the Item list, click the Activities menu to get there: Once there, choose the Adjustment Type at the top of the window, select the Inventory Site, Item, and enter the proper Serial or Lot Number: 31

33 A huge time saver if you have a large number of these to enter is to use Excel and copy/paste the numbers. There is a drop down list on the Add Serial/Lot Numbers column: Click the dropdown arrow for a Quick View. If you already have a list of your Serial or Lot numbers in Excel, you can copy and paste them right into this window. Before After 32

34 Reporting will give you a chance to see all your hard work paying off with Serial/Lot Number tracking. The Inventory Center is a good place to start, and an often under utilized feature. Many features can be accessed from this screen: Edit Order Cost and Price Run Reports See Item history See where Items are Add Pictures In the Inventory Center, you can Add/Edit Items, see Item transaction history, see the location of Items, even pictures of Items can be added here, and Reports can be run from this screen. Let s look at some of these reports. 33

35 Inventory Stock Status by Site: This report is instrumental for an inventory or purchasing manager to track inventory levels and reorders. For even more flexibility, you can look at the report one Site at a time or multiple Sites. You can hide Items with zero quantity on hand, especially useful to shorten a potentially already long report. Enabling Full Assemblies includes in the Reorder Quantity column the components needed for sub assemblies on Pending Builds. This report includes a button to Create Auto PO s : 34

36 This will open the Create Auto PO s screen, which shows what needs to be ordered, and allows you to edit the Quantity to Order. QuickBooks will then automatically create the Purchase Orders for you. All you do is select which Items and verify the quantities and locations: Remember you can always override the Quantity to Order. Especially when you want to have enough inventory reserves for upcoming sales. Negative Item Listing: Negative inventory should not happen but the ability to run a report and see which Items are showing negative is very useful. In QuickBooks Enterprise Solutions 15.0 there is a Preference to disallow negative inventory (covered earlier in this manual), hopefully rendering this report unnecessary. 35

37 Quantity on Hand by Site: This shows what you have and where it is. As with any inventory report, pay close attention to the dates. Each Site gets its own column across the top of the report. You can choose which Sites to report. And you can hide zero quantities on hand, although there may be value in seeing that a location has zero of an item on a report. Because of the horizontal layout of Sites in this report, if you have a large number of Sites (for example 200 Sites), the report may have difficulty running due to system resources. 36

38 Quantity on Hand by Serial Number: The benefit here is being able to see Serial or Lot Numbers. This report can be accessed from the Inventory Center. Highlight the item on the left side of the screen and select the Report on the right, to display the Quick View report shown in the center: 37

39 FIFO (First In First Out) Costing FIFO is just another method of calculating the value of Inventory and related Cost of Goods Sold. For a long time, the only method available in QuickBooks was Average Cost. Now you can choose to say that the first item bought is the first one sold, and calculate Inventory and Cost of Goods Sold accordingly, instead of by Average Cost. You make the choice through the same Advanced Inventory Settings button as before, in Preferences via the Edit menu: Because this has an effect on historical financial statements (Inventory Asset and Cost of Goods Sold), if you choose to turn on FIFO, it is recommended to do it as of the end of a fiscal year, so as not to have multiple inventory costing methods in a single fiscal year. WARNING: QuickBooks will let you change the FIFO date at any time, it does not lock it. Obviously, you should not set it more than once! 38

40 With FIFO costing, you do not see the effect unless you know to look for it. Inventory quantities are handled the same, but it s the valuation figures that change. Barcode Scanning This can make data entry faster and easier. With this feature, you can scan bar codes when recording purchase and sale transactions. You turn this on through the same Advanced Inventory Settings button as before, in Preferences via the Edit menu: There is the Barcode Wizard to help get started with creating bar codes. 39

41 If you already track bar codes, the Barcode Wizard helps move them to the right field. You can specify from where to pull the bar code number, including from custom fields: Then the Wizard asks if you would like to create new barcodes and for which Item types: 40

42 QuickBooks supports most USB and Bluetooth scanner devices. The specifications QuickBooks recommends are: The scanner must support EAN 13 (International Article Number, formerly European Article Number) and Code 128 barcodes. The scanner must produce a single carriage return at the end of the barcode. Serial port scanners are not compatible with the Advanced Inventory Barcode feature. Scanners are very simple to test. On any version of Windows, select Start > Accessories > Notepad. Then scan some bar code as a test and you should start to see the bar code number in your Notepad application. In QuickBooks, you can find the Barcode Numbers stored in the Edit Item window: Note that Barcode Numbers that are generated by QuickBooks using the Barcode Wizard will start with the prefix QB:. This can be changed as necessary. 41

43 In the Item List, you can see the actual barcode images: If you do not see this column in the Item List, it is a simple customization of the Item List view. Rightclick anywhere on the List itself to get this menu and select Customize Columns: 42

44 Then select to add the Barcode Image field from the Available Columns to the Chosen Columns: The barcode images in the screenshots above are truncated that is, they show on the right edge of the barcode image. If you want to show the entire barcode image, simply make the Barcode Image column wider. It is a display issue on the list, not a problem with or a part of the barcode itself. If you need to print out your Barcodes, there is a built in report: 43

45 To use your scanner in transactions, simply go to a transaction entry form and scan. You can open a Purchase Order, Item Receipt, Vendor Bill, Sales Order, Invoice, and more, and begin scanning Items. QuickBooks will automatically add the Items to the transaction, provided that the Barcode Number is found in the Items List. If you click to scan repeated times, QuickBooks will increment the Item Quantity on the transaction appropriately. 44

46 When to Step out Beyond QuickBooks While there are many things Enterprise Solutions can handle, there are times when external, 3 rd party solutions might be better suited. For example, if you needed more than 30 users you would need to consider an add on beyond QuickBooks, as its user limit is maxed at 30. Other considerations: Mobile inventory picking or receiving Unless you are taking your laptop with QuickBooks with you, this is not possible within QuickBooks. Materials Scheduling QuickBooks does not handle this. Different Costing Methodology While we know that QuickBooks can handle weighted average and FIFO costing, any other cost method is not supported without an add on. Web store Integration A 3 rd party application is needed to connect QuickBooks with a web store. If QuickBooks is the right answer, great! If you are trying to get QuickBooks to do something it is not meant to do, it might just be the time for an inventory 3 rd party add on. Identify your needs and then assess your process. 45

47 Review & Takeaways QuickBooks Enterprise Solutions can certainly handle Inventory. With some of the additional tools available in Advanced Inventory and Enhanced Inventory Receiving, it is possible to get those Inventory issues under greater control. Having trouble managing multiple warehouses? Not any more with Multiple Inventory Sites. Want to track where things are located in the warehouse? Done with Bin Locations. Need to track Serial or Lot Numbers? Available with Advanced Inventory. Want the option to track inventory costing other than at average cost? Done with FIFO costing. Bar code scanning? Beep! But above all, know when to say when. For example, if you need LIFO (Last In First Out) cost, you will need to consider a 3 rd party add on. Take the proper time to learn how the QuickBooks Enterprise inventory features work and practice with them to get the most out QuickBooks Enterprise with the Advanced Inventory module. 46