QuickBooks Inventory Management: The Ultimate Guide to Ordering, Receiving, and Adjusting Inventory

Updated at: 26/06/2025

Efficient inventory management is crucial for small business success. This ultimate guide dives deep into QuickBooks' inventory features, simplifying the often-complex processes of ordering, receiving, and adjusting stock. Learn how to minimize waste, maximize profits, and gain complete control over your inventory using QuickBooks' powerful tools. From initial setup to advanced techniques, we've got you covered. Let's get started!

Step-by-Step Instructions

  1. Setup: Enable Purchase Orders

    • Go to Settings > Account and Settings > Expenses tab. Turn on 'Use purchase orders'.
    Enable Purchase Orders in QuickBooks: Go to Settings > Account and Settings > Expenses tab. Turn on 'Use purchase orders'.
    Setup: Enable Purchase Orders

  2. Identify and Order Inventory

    • Navigate to Sales > Products and Services to view low or out-of-stock products.
    • Select the product(s) needing reordering and choose 'Reorder' from the batch actions dropdown. Select the supplier, shipping address, and enter item quantities, adjusting rates/amounts as needed.
    Create a Purchase Order: Select the product(s) needing reordering and choose 'Reorder' from the batch actions dropdown. Select the supplier, shipping address, and enter item quantities, adjusting rates/amounts as needed. Create a Purchase Order: Select the product(s) needing reordering and choose 'Reorder' from the batch actions dropdown. Select the supplier, shipping address, and enter item quantities, adjusting rates/amounts as needed.
    Identify and Order Inventory

  3. Submit Purchase Order

    • Review the order details and send it to the supplier using QuickBooks' customizable email.
    Send the Purchase Order: Review the order details and send it to the supplier using QuickBooks' customizable email.
    Submit Purchase Order

  4. Receive and Record Inventory

    • Once you receive the inventory, record payment as an expense, check, or bill depending on your payment method. This updates inventory quantities and handles accounting.
    • If you haven't yet paid and received a bill from your supplier, create a bill in QuickBooks using the open purchase order details. Adjust quantities or prices if necessary.
    Create a Bill (if applicable): If you haven't yet paid and received a bill from your supplier, create a bill in QuickBooks using the open purchase order details. Adjust quantities or prices if necessary. Create a Bill (if applicable): If you haven't yet paid and received a bill from your supplier, create a bill in QuickBooks using the open purchase order details. Adjust quantities or prices if necessary.
    Receive and Record Inventory

  5. Inventory Adjustment (Optional)

    • If the actual inventory quantity differs from QuickBooks' record, adjust it using the 'Adjust quantity' option for the specific product. Specify the correct quantity and the inventory adjustment account (e.g., inventory shrinkage, theft, spoilage).
    Adjust Inventory if Necessary: If the actual inventory quantity differs from QuickBooks' record, adjust it using the 'Adjust quantity' option for the specific product. Specify the correct quantity and the inventory adjustment account (e.g., inventory shrinkage, theft, spoilage).
    Inventory Adjustment (Optional)
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Tips

  • Hover over quantity fields in the purchase order to see on-hand inventory and reorder points.
  • Consult your accountant before creating custom expense accounts for inventory adjustments.

Common Mistakes to Avoid

1. Inaccurate Inventory Counts

Reason: Manual counting is prone to errors, leading to discrepancies between physical inventory and QuickBooks records.
Solution: Regularly perform cycle counts and use QuickBooks' inventory tracking features to minimize discrepancies.

2. Ignoring Inventory Adjustments

Reason: Failing to account for damaged, obsolete, or lost inventory leads to inaccurate cost of goods sold and profit calculations.
Solution: Regularly perform inventory adjustments in QuickBooks to reflect the actual physical inventory and account for shrinkage.

3. Poor Organization and Lack of Tracking

Reason: Insufficient organization of inventory items and a lack of detailed tracking information result in difficulties locating items and managing stock levels.
Solution: Implement a robust inventory management system with clear item categorization, barcoding, and regular stock checks.

FAQs

How do I set up inventory tracking in QuickBooks?
To set up inventory tracking, go to the 'Gear' icon, then 'Company settings,' followed by 'Sales & expense tracking.' Choose 'Track inventory' and select your inventory preference (simple or advanced). Then, create your inventory items with relevant details like cost and quantity.
What's the difference between receiving inventory and adjusting inventory in QuickBooks?
Receiving inventory records the arrival of items you've ordered, updating your on-hand quantity. Adjusting inventory corrects discrepancies between your recorded quantity and your actual physical count (e.g., due to damage or theft).
How can I generate inventory reports in QuickBooks?
QuickBooks offers various inventory reports, accessible through the 'Reports' menu. Reports like 'Inventory Valuation Summary' and 'Inventory Item List' provide insights into your stock levels, costs, and values. You can customize these reports based on your needs and reporting periods.