QuickBooks 2011: 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, it’ll help you understand your options. You can handle products in two ways: by stocking and tracking inventory or by buying products only when work for your customers requires them. The system you use affects the types of items you create in QuickBooks.

When you buy products specifically for customers, you need items, but you don’t have to track the quantity on hand. In this case, you can create Non-inventory Part items, which you’ll learn 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 like 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. When you use QuickBooks’ inventory feature, the program keeps track of how many products you have on hand, increasing the number as you purchase them and decreasing the number when you sell them to customers.

Because tracking inventory requires ...