Thinking about using QuickBooks Online (QBO) for tracking your inventory?
It may very well be a good choice for your business, but here are five reasons why it may not...
(NOTE: Unlike the desktop versions of QuickBooks that only update new features once per year, QBO releases new features and functionality more often. The listing below is accurate as of the date of this blog post).
Reason #1 - No backorder tracking
If your business is lucky enough to ship every order complete, then this isn't a concern at all.
If you do have backorders, then QBO won't help so much.
Unlike the sales order tracking feature in QuickBooks Premier and Enterprise, QBO does not offer sales orders. Without them, you're forced to develop some alternate method (think Excel) to track your unshipped orders.
I have seen some businesses try to use the estimate feature of QBO for open order tracking. While that is certainly a start, it usually isn't robust enough to run your business on.
Reason #2 - No ability to fix calculated average cost problems
Every inventory item you create in QBO has two costs that are associated with it.
The first cost is the one you see in the inventory item master. I'll refer to this as the "purchase cost" and this is shown in the graphic below:
QBO "PURCHASE COST" FIELD:
QBO "CALCULATED AVERAGE" COST:
The second cost is the one that QBO carries that you can't see - the "calculated average" cost, as shown in the graphic below:
Unlike the Pro, Premier and Enterprise desktop versions of QuickBooks, QBO has no button, lever, or option available to fix this calculated average cost figure if it goes out of whack. I have worked with 3 levels of support at Intuit on this issue, and the only sound I hear is crickets when discussing it.
And it WILL go out of whack due to reason #3...
Reason #3 - No ability to stop on-hand from going negative
Do you often "ship negative" to get an invoice processed and out the door?
By that, I mean you create the invoice first, drive the on-hand quantity of an item negative at that time, and then make a vow to go back and fix it later?
If that's you, QBO is going to give you some heartburn.
If you "ship negative", that process then starts to cause problems with the calculated average cost that QBO holds (see reason #2 above). The calculated average then becomes incorrect, and then any inventory valuation type reports you run in QBO will be incorrect. I've seen the effects of this process first hand in a number of customer QBO files.
The Enterprise edition of QuickBooks desktop does have an option to stop a business from "shipping negative". The Pro and Premier desktop versions of QuickBooks don't have this option, but at least they have the "fix" available for the average cost.
Reason #4 - Can't Set the Closing Date if Inventory On Hand is Negative
The closing date in both the desktop QuickBooks and QBO is a great thing! It stops entries from being made or changes to existing entries in closed accounting periods.
Sadly, if you have just one (that's right, just one) inventory item in QBO that has a negative on-hand quantity at the time you go to set the closing date, you'll be presented with this lovely message:
Sorry to say, there is no way around this other than to get in and fix each and every negative on hand value as of the date you want to set.
I have never seen the Pro, Premier or Enterprise versions of QuickBooks flash this message if an on-hand value is negative.
I am unable to even attempt to explain the logic behind the scenes as to why this happens in QBO - it makes no sense to me.
Reason #5 - No Custom Fields for Inventory in QBO
The Pro/Premier desktop editions of QuickBooks offer you five custom fields to use as needed.
The Enterprise desktop edition of QuickBooks provides fifteen custom fields to use as needed.
QBO offers....zero (at least that I could find anyway).
Depending on what type of information you need to track for your inventory (i.e. color, weight, size, etc.), you may find this to be a very limiting factor.
GREAT NEWS! THERE ARE PLUG-INS THAT CAN SOLVE THESE INVENTORY PROBLEMS...
If you like the concept of QBO and find that it works well for other aspects of your business, you'll be glad to know there are options out there that can help fill in these missing pieces when it comes to tracking your inventory.
Plug-ins such as:
can be brought into the mix to help you overcome the inventory limitations currently found within QBO. Naturally, it's important to understand just what it is about your inventory that you need to track - that will help determine which plug-in may be the best fit for you.
NEED HELP SORTING IT ALL OUT?
I've been working with inventory-based businesses for over thirty years, and I welcome the opportunity to consult with your business on this topic.