QuickBooks 2020 – Section 6 Transcript
The transcripts below come from the QuickBooks 2020 course on Simon Sez IT. You can follow along for free by watching the free QuickBooks 2020 course.
Working with Items – Part 1
Cindy: We’re starting on module six now and this is where I want to talk to you a little bit about working with items and inventory. Items are things that you sell to your customer or sometimes you purchase items. If you remember back when we created our estimates we actually pulled in two items on to that estimate. We pulled in framing, which was a service we provide and we also pulled in an exterior wood door, which is an inventory part. I want to go through in this particular section, section one, and talk to you about how to go ahead and set up those items. We’re actually going to have two parts to this particular section so make sure you watch both parts and we will talk about setting those items up and get them set up correctly. Let’s go ahead and flip over to QuickBooks and get started with our items.
The way you’re going to get to the items and services list is right over here on your Home screen you’ll have an icon that says Items & Services. This is a list of all the items and services that your company currently has set up and I want to show you how this list is sorted. You’ll notice that these are set up by type and if the type is the same, like you’ll see all the service items in here, then all the service items are alphabetical. And that would be true for each of the different types. If you happen to come in here and your list is not sorted by type it could be that you’ve clicked on one of these other headings and you’ve re-sorted it by that column. I’m going to go back and click Type to sort it again.
Now let’s talk about the different types of items that we can have. Some of your items you provide are services. Think about when you have labor, if you have repairs, these all have to do with subcontractor services. These are all services that the company provides.
The next type that you see are what we call inventory parts. True inventory means that I sell chairs and I have six in the backroom. I’d like QuickBooks to pop up and tell me I have two left so that I can order some more. And that’s true inventory when you want to keep a count on how many you’ve ordered, how many you have, and how many have gone out the door. You can see in this list that with inventory items only it will show you the total quantity that you currently have on hand over in this list and you’ll also see the price, meaning the total for the all of the ones you have. And I’ll show you a little bit why some of these have a zero over in the price.
The next type if you go down the list is an inventory assembly. Sometimes you have to actually purchase several different parts to make a main part and we call that an inventory assembly.
Now below that you have noninventory parts. These are physical parts that you buy or sell in your business but you don’t care to check how many you have in the backroom. When you look at this if you think about lumber, for example, there’s lots of different types of lumber. Like they have trim. They don’t really count that they have ten in the backroom but they do want to know at some point how many they’ve had to purchase and you can run reports to see that.
Below the noninventory you have your other charges and you can see these are just like miscellaneous type charges like they have a freight reimbursement, they’ve got delivery charges, they’ve got a permit charge, things like that.
Then you have what we call subtotals. Subtotals are really great because what they allow you to do is put in several items and then the next line you can choose this subtotal option for example and it will subtotal anything above where you’re clicked. Now if you’ve got more than one subtotal it will only subtotal the ones right above you and if it sees a subtotal up above it stops there. So it’s not going to subtotal the entire list.
A group. Construction is a prime example of using the group here because what would happen is let’s say there are several different house plans. There are many different items that go into each one of those plans. And if you had to estimate those or put them on an invoice you would be there forever pulling all those individual items in. What you can do is create a group, give it a name, and then tell it which items go in the group. That way the next time you want to use this option you just pull in the name of the group and it prepopulates all the items for you. And of course you can make any changes that you like.
There are discount items. If you’d like to be able to put a discount on your invoice, for example, you could add that as your last line and it will do the calculation for you.
You can also add payments or prepayments to your invoices. I don’t like to do this because let’s say that you had an invoice for $1,000 and a customer paid you $200 up front and you put it all on the invoice. What that means is the actual amount that the customer owes on the invoice is $800. And if you looked in a report all you would see is an invoice for $800. You wouldn’t see anywhere that $200 they’d already paid. I personally prefer to put the entire invoice for $1,000 in, then receive the payment and that way I can see that the balance when I’m looking at a report is $800.
Below that we have several different sales tax items and sales tax groups. We’re going to be talking about sales tax in a later module and I’ll show you how that works.
Some of you may end up having six or seven items. Some of you may have thousands. It really just depends on your business. I want to take a few moments now and show you exactly what you need to set up when you’re setting up an item.
The quick way to set up any new item is just to right click and I want to show you that there’s your New option, your Edit if you wanted to edit one. You can duplicate an item if there’s one that you need to create that’s very similar to another one. There’s also your Delete option and then you can add or edit multiple items all at once. Remember that you can’t delete an item that you’ve used at least once in QuickBooks. That’s because those numbers need to pull in to your reports. If you need to delete an item make sure that you go ahead and create a new one correctly and then move all of the corresponding entries to the new item. Then you can delete this one. Or actually it’s a little bit easier just to make it inactive.
I’m going to go ahead and open one that’s already here. We’re familiar with framing so I’ll just right click and Edit that one. The first thing you would have to tell QuickBooks if it was a new item is what type of item is it and this is a service. One of the very few things in QuickBooks you can’t change is notice it won’t allow me to change this from service to maybe inventory, for example. If I needed to change this I would create a new one and make this one inactive.
The first thing we have to put in is the name of the item, which is Framing in this case. It’s not a subitem of another but let me show you what a subitem would look like. I’ll flip back to the item list for a second.
If you notice this one is called Subs and underneath it they have carpet, drywall, duct work. These are subitems of Subs.
The next thing you’re going to see is the unit of measurement. If you remember I told you that there might be some items you sell by the foot, the yard, the case. You can go in and actually set that up here so that you can choose those from the dropdown list when you’re on an estimate or an invoice.
Description. This is what the customer will see. You’re going to go ahead and put in whatever description you want to prepopulate. If it’s something that will be different every single time then just don’t put anything in there at all and you can edit it on the actual invoice itself, or the estimate.
Over here is the rate, how much you charge for one of these. If this rate is different every single time you use it then you might want to just put this on zero and change it when you’re on that estimate or invoice.
Tax code means for sales tax purposes is this item subject to sales tax, yes or no? And then the most important thing here. When I actually put this item on an invoice which account will it go back to? And in this case it goes to labor income. Now you’re going to see that most of the time, not always but most of the time you want this to point back to an income account.
I’m going to go ahead and click OK on that one. I just wanted to show you what it actually looks like when you’re setting up an item.
Now what we’re going to do is go ahead and create a brand new item. And I’m going to go ahead and stop the video right here and I want you to flip over to part two where I go through and set up an item with you.
Working with Items – Part 2
Cindy: We’ve already started looking at how to work with items. We actually looked at framing. What I want to do now is go ahead and set up a brand new item with you and show you exactly what you need to put in when you’re actually setting up an inventory part. Let’s go ahead and flip over to QuickBooks and we’ll keep talking about working with items. This is section one, part two.
The easiest way to create a new item is to right click and choose the New option. The first thing we have to tell QuickBooks is what type of item will this new one be. Remember framing was a service we provided. Now we’re going to look at inventory parts.
I want to actually call this one a Screen Door. It is not going to be a subitem of another but if it was I would check the box and choose the item it’s a subitem of. I also have a field to put in the manufacturer’s part number. This is really just informational for you. That way you have that part number handy when you’re ready to order some more of these.
We talked about the unit of measurement. Remember if this is something I sell by the yard, the foot, the case I can add a new item to this list.
The way the inventory part screen is set up is you’ll notice that on the left hand side here is the information related to the purchasing. And this is the information related to when you sell that particular item. Let’s start with the description. I’m going to call this Screen Door. If when you purchase this from your vendor they have some other wording or maybe the part number is part of the description you can type all of that in here. If you just hit the Tab key it’ll bring that same description over to the right. Now this is the description you want to put in for customers. So this is what will pull when you’re on an invoice or an estimate and you type in Screen Door. These can be the same or different.
On the left is the cost. If you have an average cost that you pay for this you can go ahead and plug it in right here. It does not mean the last time you purchased it it was $175. It just means on average what do you normally pay for this? If it’s really all over the board you can just leave that on zero.
You do want to make sure you leave this on Cost of Goods Sold because you remember this is a product I have to buy to sell a product in my business. So it stays in this account called Cost of Goods Sold. And if you have a preferred vendor you can always pick that vendor from the list here. You can always type in the new vendor if you don’t have the one you want on the list here.
Over on the right the sales price. On average what do you sell this screen door for? It doesn’t mean that every time you sell it for $225. It’s just that this will prepopulate when you create an estimate or an invoice.
For sales tax purposes is this item subject to sales tax, yes or no? Typically a service you provide is not but a physical item is. Therefore I’m going to choose taxable sales. And the next thing is which account would you like this to go back to? We’re going to pick in this particular case Materials Income. Remember it needs to go to an income account. It says that right there. Do not pick a different type on this particular dropdown.
At the very bottom because this is inventory you want to keep this inventory asset account right here because any time you have inventory in the back room it is an asset to your business. You are worth more because you have that inventory. You can set a minimum and a maximum reorder point. A minimum means when you get down to let’s just say two you want QuickBooks to pop up and tell you to order some more. A maximum means you don’t want to get over a certain amount because you don’t want to have too many in the back room. So you can set that as well and it will pop up and let you know.
How many do you currently have on hand? Let’s say you have three. It will go ahead and calculate that total value for you. Notice it is calculating three times your cost right over here. And of course the next thing is your as of date.
That’s really all you need to set up when you’re setting up an inventory part. I’m going to go ahead and click OK and let’s see what it looks like in our list.
Here’s our screen door. Notice we have three of these on hand and the price, $225 is what we charge for these.
I want to point out something that I mentioned to you a little bit earlier. If you look over at the column that says Account right here, remember I said to you that most of the time your items will point back to an income account. Not always but most of the time. If I scroll to the top of this list and look you’ll notice going down this list these all represent income accounts. It’s not until I get way down here where they’re talking about freight and delivery, in this case it’s one that’s reimbursable then they have some other accounts. But like I said, most of the time you want these to point back to an income account. And that’s one of the things that when I’m working sometimes with customers of my own that they will say to me that my inventory is not right, the numbers are not right and most of the time when I look back these accounts are just all over the board. So make sure that you have most of these set up to an income account.
There’s a few things on the bottom I just want to mention to you real quick. First of all, under this item you’ll see there’s a dropdown list. And these are the same options that we could do when we right clicked earlier. Notice there is a Find option here and I wanted to point out that this is where you can find this item in transactions in QuickBooks. But if you’re just looking for an item in this list you can look for it right up here. You can type in any part of the name that you might know. And if you don’t know the name you can look at maybe a preferred vendor or if you have a part number and you don’t know what it goes to you can look it up that way.
I want to also point out that you have several reports you can run that have to do with your items. And also where it says Excel here, you can actually import items you might already have in Excel or if you want to paste from Excel. And basically what that would mean is if you already have an Excel spreadsheet somewhere you can go ahead and pull in all those items provided that your spreadsheet is set up with these headings as your column headings at the top.
And that’s really all you need to know. I’m going to go ahead and close that.
That’s going to go ahead and wrap up section one where we’ve been talking about working with items. Let’s move on now to section two and I’ll show you how to create purchase orders.
Creating Purchase Orders
Cindy: You have the ability to create purchase orders in QuickBooks. Basically a purchase order is a record of an order you’ve placed. Usually it’s for a product that you’ve ordered. Think about the screen doors that we set up back in section one. If I wanted to order some more of these I could give them my purchase order number and then they would actually fill that order and then ship it to me. Purchase orders are just a way of tracking your different orders. And they’re really handy if you order a lot of items. That way you can kind of keep track of what’s come in and what hasn’t. Let me go ahead and show you how to go ahead and create a purchase order.
Before we create our purchase order I’m going to flip over to the Item list and see how many screen doors we currently have. It looks like we have three and we’re going to order four more. So we’ll see that number change.
Back on the Home screen there is an icon here for Purchase Orders. Before I click on that let me just mention something that I talked to you about way back when we created our estimates. Anything on this line right here is considered non posting. I can place a purchase order all day long for four more of these screen doors but they may never come in. That’s why this is considered non posting. Once they do come in that’s when you start seeing those numbers show up in your reports. You’d have to run specific purchase order reports to see what’s open, if you’ve got purchase orders that are closed, meaning you’ve received all the items from them. Maybe some of these have a door or two left. You can run reports to see that. I’m going to click on Purchase Orders.
The first thing it asks me is who is my vendor. I’m going to pick Perry Windows & Doors. I’ll choose the class Remodel and if I want Perry to ship these and drop them off at my customer site I can choose that customer and job. If not I’ll just leave that blank. This is the template we’re currently using for this purchase order. We will see in a later module we can customize this one or we can add a new one.
I’m going to click down where it says Item here and dropdown the list and choose Screen Door. You’ll see it prepopulated the description and the rate because that’s what we set up when we set up this item. If I wanted to add something to this description or type over it I can do so all day long. How many are we wanting to order? That’s the quantity. We’re going to say four. And let’s say that we’re buying four because they’re on sale. Let’s say that they’re going to be $125. If I’m buying these for a specific customer or job I can choose it from the list here. This is a little different from up here where it says Drop Ship because this is where I want Perry to ship the items. This is just saying am I buying this for a particular customer or job. You’ll notice that it calculated four times my rate to give me the $500 for the amount. And that’s all I want to do.
Let’s look at a couple of the options around the top here. Notice we’re under the main tab and let’s see if there’s anything that’s different. I think you’re familiar with most of these by now. We’ve got your Find option if you want to search through your purchase orders. Here’s your New option. Remember this would save this one and create a new one. I could go ahead and just save this now. This can also be saved as a PDF in case I want to maybe go into Outlook and attach it as a file. Here’s where I delete it. I can also create a copy or memorize this. Over here is where I’m going to print this. Let’s preview it and see what it looks like right now.
You’ll notice it’s very simple. It has my company name and address on the left. It says it’s a purchase order. And you can see it’s got the vendor name, it’s going to be shipped to my company address, and then you’ll see down at the bottom I have the item, the description, the quantity, the rate, and the amount. Let’s go ahead and close that at the top.
Under the Formatting tab, this is where we’re going to be able to customize some of the purchase order templates, run our spellcheck, we can insert a line, delete a line and copy a line. This has more options here for customizing the template as well.
The last tab says Reports and I want you to make particular note of the Open Purchase Orders right here. Open Purchase Orders are purchase orders you’ve created but you haven’t received everything on those purchase orders. You’ll want to run that frequently and make sure you’ve gotten all that you ordered.
You can see these by job, you can look at them by item, and you can also see an item list and any purchases you made by vendor.
Over here is the date of the particular purchase order. I’m going to date this for the 19th. And remember I told you that anything that’s numbered in QuickBooks starts with number one and will number sequentially. If you needed to change that number you can change it to anything you like.
That’s pretty much all there is to creating a purchase order. I’m going to go ahead and Save & Close this one at the bottom and let’s look back at the item list for a second because I want to show you that there are still three because all we’ve done is place an order. We have not actually received them yet. That’s what we’re going to do over in section three. I’m going to show you how to receive those items and when we do this quantity will increase by four.
Receiving Items
Cindy: Once we’ve placed a purchase order for some items then the next step is those items will actually be shipped to us by the vendor and we’ll need to go through QuickBooks and receive them. That’s how those items will get into our inventory. Let me show you how to go through the Receive Items window and actually receive the item so that you can see your inventory actually go up.
Before we actually receive our items I wanted you to notice that if we’re looking in our inventory list we will see that we have three of the screen doors. We’ve ordered four more and they’ve just come in so we’re going to receive them into our inventory.
Back on the Home screen we’re following the flowchart. The next thing after Purchase Orders is Receive Inventory. You’ll notice there’s a down arrow because this can actually happen one of two ways. The vendor can actually ship the items and include the bill in the packaging with the items. But more than likely it’s going to go the bottom way where the vendor will ship the items and you’ll get a packing slip along with your items and later a bill will come to you in the mail or email or however they send it. We’re going to choose the bottom option.
This is what’s called an Item Receipt and the first thing it wants to know is who is our vendor. This is Perry Windows & Doors. It will pop and say Open purchase orders exist for this vendor and ask if we want to receive against one of these. An open purchase order means that there are still items we haven’t received. We’re going to say yes.
You’ll want to choose whichever purchase order you want to receive the items against. In this case it was the one dated 12/19 and we’re going to click OK. And now you’ll see that it has actually prepopulated this Items tab with those four screen doors. If your vendor had shipped three and one was on backorder all you would do is change this quantity to three. That would leave one still open on that purchase order and when it came in you would receive it the same way.
I’m going back up here to the date. Let’s say we received the items on the 24th. If there was a reference number that you wanted to put in here you could. And the total is $500. There is no tax or shipping or anything on this because this is not the bill. This is just a receipt showing we received the items that we actually told it we wanted.
Up at the top here there’s not too many things that are new. I did want to mention that if you picked the wrong purchase order before you came into the Item Receipt here you could go back to Select Purchase Order and change it to the correct one. You also have the ability here if you wanted to enter some time. Remember that job costing involves time that you or your employees spend working on a project or a job for a customer. Part of that time might be receiving these items. It might take a little bit of time to open the box and check them out and actually put them in your inventory in the back room.
The Clear Splits option would just basically delete everything here. And then we can have it recalculate if we needed to.
Under the Reports tab you have a few reports you want to make sure you’re aware of. Here’s your item listing, your open purchase order detail, vendor balance detail and your unpaid bills detail. You might want to look at those. You’ve also got your purchases by vendor detail here as well.
That’s really all there is to actually receiving your items. I’m going to Save & Close at the bottom and let’s go check out our inventory now. We should have seven. Under the item list and we do. We have seven screen doors now. And that’s one of the ways that your items get into inventory.
Let me go ahead and go back to the Home screen now and I want to talk to you a little bit about creating bills for those items over in section four.
Creating Bills for Items
Cindy: Once you’ve received your items, in this case the screen doors that we ordered, we’re going to get a bill at some point that we’ll have to pay. I want to go ahead and show you how to enter that bill and how to actually tell QuickBooks that you’re creating a bill based on that item receipt that you entered. Let’s flip over to QuickBooks and I’ll show you how to create a bill for items.
If we’re following the flowchart the next thing on the flowchart says Enter Bills Against Inventory. Let me just mention that if you went straight to this Enter Bills here, which would be okay, as soon as you put in that the vendor’s name is Perry Windows & Doors it would pop up and say would you like to receive against one of your item receipts. So either way would work but let’s follow the flowchart.
The first thing it asks me for this item receipt is who is my vendor and it’s Perry Windows & Doors. I’m going to select the item receipt I’d like to pull in and click OK. And now you’ll see that I have a bill and it prepopulated with all that information from that item receipt. Because this is a bill we’re going to have to change the date. We’ll say we received this on January the 15th. We’re going to plug in the reference number. Remember on the vendor side it is an invoice. On your side it is a bill. And we’re going to say it’s $525 because they actually charged us for freight and delivery as well. Always check your due date. Make sure that that is accurate. You want your reports to be accurate when you run reports to see how much you owe. Here’s where you have your terms. If those are not correct you can change that. You can also plug in a discount date if you have terms that are one of these two and they give you a small discount. There’s a place for a memo and you’ll see that it prepopulated everything on this Items tab. There’s really nothing you have to change there other than if these go to a particular customer and job you could pick it from this list. On the Expenses tab this is where I’m going to choose the freight and delivery of $25. And again if it’s for a particular customer and job I’ll want to choose that from the dropdown list. And I also want to be careful that I’m always using my class list so that my reports are accurate when I pull them up.
Let’s see if there is anything new up on your tabs here at the top. We’re on the main tab and most of this you’re already familiar with. I will mention this. If you need to select a different purchase order, maybe you pulled in the wrong one, you can go here and you can actually look at any of those P.O.’s. Also remember that some of the time spent on processing this bill is part of your job costing. So if you wanted to add that you could. You could also clear your splits down here. Your split is where you have $500 on one tab and $25 on another. And notice the last tab says you can pay the bill. We’re not at a point where we’re ready to pay the bill yet but I could if I was on this screen.
There are some reports that you’ll want to make sure you look at. You can run a transaction history if you want to follow this bill all the way back. You can also look at some of these others over here. There’s an item listing, an open purchase order detail, vendor balance detail, unpaid bills detail, and purchases by vendor detail. We’re going to be looking at a lot of these reports in a later module but these are the ones related to this particular bill.’
All I’m going to do is go ahead and Save & Close and this bill is now in my Accounts Payable. And by the way because this one was linked to an item receipt, which was linked to a purchase order it will always bring you this, give you this message saying that it’s linked to other transactions. Are you sure you want to change it? Yes. And that’s all you have to do to enter your bills against your inventory.
Let’s go ahead now and move over into section five and I will talk to you about paying for those items.
Paying for Items
Cindy: Now that we’ve ordered four more of the screen doors we are going to have to go ahead and pay for them. we did get the bill and now it’s time to pay for these. It’s very easy. Let me go ahead and flip over to QuickBooks and I’ll show you how to pay for those items.
You’re actually going to pay this bill the same way that you paid any other bills you had entered in QuickBooks. You’re just going to follow the flowchart to the very end where it says Pay Bills.
In this case we’re trying to pay Perry Windows & Doors and you’ll see there’s quite a few bills here but I’ll go ahead and check off the one that we created for $525. If I wanted to go to that bill and look at it I could do that down here at the bottom. Remember that you can’t double click here. I’m going to change the date of my payment. I’m going to say it’s January the 20th. I’m going to pay with a check and I’ll assign a check number here. All I have to do now is hit Pay Selected Bills. I’m going to actually put in the word Debit since I used the debit card to pay for this and click OK. And now that I’ve paid that it’s going to ask me if I have some more bills I’d like to pay or am I done and I’m just going to say I’m done and now that whole process has been completed. You have gone from a purchase order, you’ve received your items which went into inventory, we received a bill and we entered that, and then we paid the bill. Now that process is totally complete.
Let’s go ahead and look at one more thing in this module over in section six. I want to show you how to manually adjust your inventory.
Manually Adjusting Inventory
Cindy: We’re on the last section of module six now. We’ve been talking about how to work with items and inventory in this particular module. In this particular section I want to talk to you a little bit about how to adjust your inventory manually. And what I mean by that is inventory just gets off. That’s just how it happens. And you’re going to have to come into QuickBooks and adjust your inventory from time to time. You can adjust the quantity on hand and/or the value. Let me just show you where you’ve got to do that and we will do a quick one and then we’ll be done with module six.
Let’s go ahead and flip over to our item list and remember those screen doors. We actually have seven that we’ve purchased. Let’s say that some time has gone by now and we realize that we went in the back to count and we really only have six. We’d like to go ahead and adjust our inventory.
The easiest thing to do is just right click and you’ll be able to come down to this option here that says Adjust Quantity or Value on Hand.
The first thing it asks you is the adjustment type. Is this going to be an adjustment for the quantity, the value or the quantity and the total value? We’re going to say the quantity. The adjustment date. We’ll pick January the 23rd. And then the adjustment account. And what you’re going to want to do is if you don’t already have an account set up create one called Inventory Adjustments and when you set it up it’s going to default to a cost of goods sold, which is what you want. You don’t need to fill out anything else here. Just go ahead and hit Save & Close and now you’re going to put a reference number over on the right. Remember I told you that anything that’s numbered starts with a number one but you could actually put any number you’d like and it will number the next one sequentially. If this is related to a particular customer and job you would want to choose that from the list and also if it’s related to a particular class you want to choose that from the list as well.
I’m going to click underneath where it says Item here and I’m going to go ahead and type in my screen door. Notice it tells me that I have seven on hand but I want to say that my new quantity is six. Notice when I tab through it it knows the difference already. It’s going to subtract one so I end up with six.
There is a place at the bottom to put a memo if you’d like. And other than that you’re just going to go ahead and click Save & Close at the bottom. And notice now I have six. And that’s how you manually adjust your inventory.
I’m going to flip back to the Home screen. Now this wraps up module six where we’ve talked about how to work with your items and inventory. Let’s go ahead and flip over to module seven talk a little bit about working with QuickBooks registers.
Cindy McGuckin
Cindy McGuckin is an IT trainer with over 20 years of experience. Cindy currently manages the IT Training Department at Trident Technical College, she's a Member of the Association of IT Professionals, Charleston, SC chapter and the Treasurer of the South Carolina Association of Continuing Higher Education.Cindy is a Microsoft Office and QuickBooks expert and her online courses have received hundreds of 5-star reviews. Her no-nonsense approach to teaching complicated topics makes her classes engaging and interesting.
