QuickBooks 2005: The Missing Manual

Should You Track Inventory with Items?

If your business is based solely on selling services, you can skip this section entirely. But if you sell products at all, you can handle them in two ways: by stocking and tracking inventory or by buying and reselling it on a customer-by-customer basis. The system you use affects the types of items you create in QuickBooks. When you use QuickBooks' inventory feature, the program keeps track of how many products you have on hand as you purchase and sell them to customers. When you purchase products specifically for customers, you still need items, but there's no need to track the quantity on hand. In this case, you can create non-inventory part items, which you'll learn more about shortly.

For example, general contractors rarely work on the same type of project twice, so they usually purchase the materials they need for a job and charge the customer for those materials. Because general contractors don't keep materials in stock, they don't have to track inventory and can use Non-inventory Part items. On the other hand, specialized contractors such as plumbers install the same kinds of pipes and fittings over and over. These contractors often purchase parts and store them in a warehouse, selling them to their customers as they perform jobs. These warehoused parts should be set up as Inventory Part items in QuickBooks.

Tracking inventory requires more effort than buying just the materials you need. Use the following questions to determine whether ...