QuickBooks Inventory: Tracking Finished Goods

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This is QuickBooks lesson: inventory, tracking finished goods.0002

Now QuickBooks, in the versions of Premier, the Accountant and Enterprise versions of QuickBooks,0008

they allow you to track the building and sale of finished goods using assembly items.0015

This is only available again in the Premier, the Accountant and Enterprise versions of QuickBooks.0022

If you are using Pro or lower, it is not going to give you this feature, but if you are, continue on with this lesson. This is very valuable.0030

In QuickBooks, the Inventory Assembly items actually allow you to create an item that it contains0039

assembled material units, finished goods that you buy or produce and track its inventory and resell.0046

So, you can keep track of how many items that remain in stock after a sale, and how many items you have on order.0053

Your cost of goods sold and the value of your inventory, you can keep track of.0062

Note that the Inventory Assembly items in QuickBooks are appropriate for indicating light assembly items on a Sales Forms and in Reports.0067

But QuickBooks does not track inventory throughout a manufacturing process. That is a little more detailed.0077

You may want to look at a different type or a heavier type of system to track your manufacturing process.0084

But, for smaller type of items, you can certainly utilize it, that contains smaller amounts of assembly items.0092

And you must have QuickBooks again, the Accountant, Premier or Enterprise versions to utilize the assembly and building of assembly items there.0101

Now, the question really is whether we use Group items or Inventory assets-0113

what is a group item, and what is an inventory asset to creating those.0121

So, Group items are actually useful for quickly entering a group of individual items that you have already0126

set up as a single item in your list that you typically sell as a package for instances, lumber.0133

You might have a construction company that remodels houses.0141

You could sell and set up a group item that lists the significant components of a remodelling job for instance, labor lumber, mark-up, etc.0146

So, there might be a group of items that they just put in as a remodelling job.0157

Sales reports for the company would then actually show income broken down by0164

each of those components instead of the single lump sum for all the remodelling jobs.0169

So, it is, kind of, a quick way to lump in a job and lump in some of those items that are typically sold.0173

If you need to track a lot of detail about your items but also want to give your customer simple and uncluttered invoices,0181

you can group and use Group items to do both, so you can show them that.0187

When you invoice them, it will just give a group item that includes the lumber and the labor and the materials, part of that single item on an invoice.0193

Group items also give you a way to enter a great amount of line item detail quickly.0204

So, you can actually pull in a group item and already pull in all the components that you need that you typically would bill to the customer for that.0210

Now, using Inventory Assemblies is a little bit different.0220

Inventory Assemblies would be an assembled unit just added to quantity on hand and its components.0223

So, the Inventory items that you used to bill the assembly would then, be reduced and then, the assembled item would be increased.0231

They are automatically deducted from the quantity on hand.0241

So, by using Assembly Items, you also always know how many assembled and component items you actually have on stock.0244

So, you have all the assembled little pieces, and every time you build a piece that reduces that quantity and then,0252

increases the quantity of the assembled finished product you have ready to sell, and it increases that quantity.0258

So, it keeps those things in balance and the quantity in hand that you have.0264

You can actually specify a price for assemblies that are different from the sum of the components.0268

So, you actually have the sum of the components, the products, the cost, which actually can build in a slightly higher cost in that, as well.0274

We can easily access the date items were assembled and quantity and cost of assembled items in detailed bill of materials.0283

You can also set up a Build point, so QuickBooks will remind you when you have finished products or down in inventory.0292

It will remind you "Hey, you only have ten items left. You might want to build and create and increase your inventory in that and build more.0300

So, that really helps you maintain your inventory at all levels, your components,0309

the items that are on inventory that make up the final finished product that can be sold.0315

For instance, we have had a client that sews dresses for little girls, and they do that.0323

So, there is components with that. There is the labor involved in the sewing.0332

And there is the materials and the ribbon and the various components that make up the dress.0336

So, they buy all that in inventory in bulk, but whenever they assemble the dresses then, they can utilize the Assign the labor,0342

Assign the materials and the lacing and ribbons and whatever else that comprises that final product that is ready for sale.0350

So, that client can utilize the QuickBooks Assembly and Inventory Tracking very healthily.0360

And it helps our business very well to be able to make sure things are cost-effective for them.0366

So, the thing that we want to do is actually set up a default mark-up.0372

First thing we can do is adding a basic mark-up to our inventory costs, and we can put in a basic mark-up in QuickBooks for all products.0377

So, in order to do that, we need to go to our Preferences. Remember where Preferences is found.0390

We go to do Edit menu and pull down and click on the Preference window. We can find our Time and Expenses.0395

We have to scroll down and get to our Time and Expenses area.0406

And on Company Preference tab, we can make sure that we can choose a mark-up percentage. At this point in time, we will say at 20% - OK - mark-up.0410

So, in the field, the Default mark-up percentage, we will put in 20%, and then, we hit tab.0424

We can, then, go ahead and click OK to close our Preference down, now that we have added the 20% mark-up on all of our items.0430

It will go ahead and affect the percentage of the next exercise that we will utilize.0439

Now, we are going to talk about adding labor item to use in Assemblies.0446

So, when we assemble our products or finished goods, there is hours of labor that we will assign to building that product,0453

so that we can have a better cost and job costing of our products there.0464

We are going to show you how to add a labor item to use in Assemblies.0470

So, of course, what we want to do is get to our Item list that we sell.0475

Where is our Item list found? Well, under the Lists menu, it is at the second from the top- Item list.0480

We will click on that.0485

Now, to add a new item, we normally can do Ctrl-N, or from the Item list, we can click on the item and menu button and choose New.0487

Of course, this is going to be a service since it is going to be labor hours, so we will choose Service.0500

And in the Name, we are going to say Assembly labor, so that is the name of our service.0507

We are going to click on the box that says his service is used in assemblies, and it is performed by a sub-contractor or a partner.0516

I will click on that, and in the Description on the Purchased Transactions, we are going to type in Direct labor. We will press tab.0526

Of course, it automatically fills in the sales information from the purchase information. The cost, we are going to say is $20, and we will hit tab.0538

It is going to gives us an expense account.0548

At this point, we will just say it is a pay roll expense and hit tab, and then, there is a vendor.0550

And we are going to not use the vendor, but we will put in the tax code, and this is a non-taxable item.0558

We are not going to tax our labor, of course.0567

Now, we are going to choose an income. It is income account, and we are going to say it is construction income but it is actually labored.0571

So whenever we bill for this, we will, then, attribute it to construction labor.0578

Now, we have our assembly labor all set up. We will click OK, and that item is ready to go.0585

Now, we are going to start building and assemble some items for resell. We are going to set that up.0594

So, we are going to create an Inventory Assembly item, and it is actually a two-part process.0601

The first process is defining an assembly item, and then, we will build that item.0608

Assembly item units are not added to inventory, and assembly components are not deducted from inventory until you actually build the item.0617

So, we are going to go ahead and now show you how to create an Inventory Assembly item.0626

Under the Item list, in the Item menu button, we are going to select New, so we are going to add an assembly item to build.0632

So, we are going to say New. We are going to choose under the Type field, it says an Inventory Assembly.0643

Now, the name of this assembly is going to be Exterior Door Kit, so we are going to build exterior doors.0653

We are going to have several items that come along with the kit.0662

In the Type, we are going to type in under the Sales Cost down below in the middle of the screen, we are going to type in $199.0673

That is the cost of our item, and then, will hit tab twice, and we are going to the Description of this assembly item.0680

We are going to say Complete Exterior Door Kit, so it is a Complete Exterior Door Kit.0691

QuickBooks will go ahead...and when we will hit tab on that, QuickBooks will allow us to set any price for assembled items.0705

The price is independent of the sales price of the components, and we can change this amount anytime we want.0711

In addition to the tax code, the tax code for assembled items and the component parts can be different, as well.0718

So, we can actually put in different codes.0727

In the Income Account field here for this exercise, we are going to type in Construction Income, but it is going to be for materials.0731

In the Building materials, now, this is where we begin putting in all the different components that make up this kit.0742

The very first item that we are going to choose is the Frames, and it is the Exterior Frames we are going to choose, OK?0752

So, we have an Exterior Frame.0763

In the Quantity field, we are just going to say one then, hit tab, and we go to the next field.0771

We are going to, then, choose our next item that we are putting in. It is going to be Doorknobs.0777

So, we are going to say it is Hardware, and it is Doorknobs Locking Exterior.0781

So, we will say Doorknobs Exterior. Let's see here, well, Doorknobs, it is Hardware.0789

It should be Doorknobs, so we will use the Doorknobs here. The Lock Doorknobs, I guess, is what we will choose, the bottom one.0800

And this, we are going to choose tab, and we will say there is one of those, OK?0810

And then, under the drop down list, we are going to type in Hardware again, and we are going to choose Brass Hinges.0819

And we will choose one of those. Actually, for the Hinges, we will choose three because we need just more than one.0828

And then, we are going to go into our Item list, and we are going to type in our Wood Door, and it is going to be an Exterior Door.0838

We will hit tab, and we want one of those, and then, we have to have one more time because we are going to add our assembly labor.0851

So, we will type in Assembly Labor and press tab, and we will put in one of those.0863

So, it is going to cost us $20 to put all that together for our labor, so we charge labor for that item.0875

So, now, our new assembly item, Exterior Door Kit is set up with all the various components as well as labor.0880

And we can edit the Building Materials for Assembly Items anytime we want. We can edit any of this.0889

The assembly revision of history is not tracked, though, so we do change it.0898

There is no history on what the costs were before and what it was before.0902

So, if you need to build the previous version of it and assembly, you need to edit the assembly and re-enter the original building materials.0906

So, keep that in mind. It does not track the history of what it used to be.0913

But, we can edit this at any time and add items to it, building materials or remove items from it, as well.0920

So, once we have that, we can click OK, and we will say "Yes, it is calculated total for building materials".0929

Cost is greater than the specified amount in the Sales Price field. Would you like to update sales price list item.0935

I will go ahead and say Yes. It will update it, and it will add our assembled item.0940

So, the sales price, we will say, under here...oh, actually we are not even done with this yet.0951

So, we have got that item, and we will get into the sales price in a minute here.0960

Now, we are going to talk about building finished goods in the next section of this.0965

Creating this item is actually building the Build Point when we need to add items to our inventory assembled items of this kit.0971

So, at this point, we want to put in five to finish this off, and the Build Point sets up a reminder,0981

again, a little tickler file in QuickBooks to remind us when we need to add that inventory.0987

Of course, we need to make sure that there is enough inventory in all the building materials, so that we can build these items, as well.0993

On hand, we are going to leave that field alone, and we are going to go ahead and change our sales price at this point in time, as well.1003

And we will change our sales price here to reflect at least the building materials' cost, and we will round it up to the 675 on this case.1016

So, we have it all done, OK?1029

We will click OK, and now, we have an exterior door kit assembled.1031

And it indicates that to us under the Type, a part that it is or a type, a service item that it is that says Inventory Assembly, and it gives us the price.1038

But, right now, we do not have any, but what we do want to do is talk about how we can build that finished product now.1050

Now, that we have the assembly item created, now, we need to build and add to the Inventory for Ready to Sell those kits.1059

So, in order to do that, we need to go ahead and go to the Vendor menu, and we are going to choose Inventory Activities.1071

And through that, we are going to say Build assemblies from the submenu.1080

And it is going to pull up a Build assemblies window for us, and we have a few of these things that we can choose.1085

But, the very first one is there is an Exterior Door Kit, and there is an Interior Door Kit.1094

We just created an Exterior Door Kit, and we are going to choose that from the drop down menu of our Assembly Item.1100

We are going to put down and hit tab. It gives us the date of today.1109

This is a build reference number that we can actually choose or count those up.1114

And under the bottom right corner where it says Maximum number you can build, and the quantity on hand is 16.1121

So, it already calculates how many we can actually build, and it tells us what we do, and then, we just say "Well, we just want to build two".1128

We are going to assemble only two of those for now, and we will hit tab.1136

We could put in a memo here if we like what we are doing. In this case, we are fine.1142

And from this point in time, we can go ahead and say Build and close. It will build those two items for us.1147

And we have two items on hand for the price of 675, so it gives us that for us.1154

The building and understanding the effects of Builds on inventory,1163

what happens as we build this item, it will go ahead and reduce the building materials.1173

It is going to reduce those quantities and increase the assembled item.1180

So, it is going to decrease the parts and increase the assembled finished product value.1187

So, we know that we have two of those. Therefore, we know that all the parts that consist in there are on hand and ready to sell.1193

We can actually generate a report that will show us some information regarding it.1201

We can look at the Item list and look at some of that for us.1207

But understanding that QuickBooks really does a good job in keeping track at the value1211

of the numbers of items that we actually have on hand, when we use the building of materials.1218

So, let's go ahead and go to the Reports menu, and we are going to run our QuickReport to generate an item list, so we can look at what we have.1225

Under the Report, we are going to choose the Reports menu. We will say Choose list.1234

So, under the Report menu, we will choose Lists, and we will choose the Item Listing from the submenu.1258

And it will pull up a general report for us, and we can look at all of our items and what we have on hand.1269

We can scroll down and look at some of those. We can see our Frames, Exterior.1277

We can see what we have on hand there. We can look at the various items over here.1287

Here is our Exterior Door Kit, and we have two items there. We have 20 Interior Door Kits etc.1291

So, it gives us a nice listing of what our inventory and what we have on hand.1298

This is something you can use to do your manual inventory count at the end of the period.1302

That is our lesson on setting up the inventory and going through the tracking of the finished goods and building materials and adding assembly items.1312

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