10 QuickBooks Tips for Product-Based Businesses
This post is brought to you by Lettuce, a simple inventory management tool made for e-commerce and wholesale.
Accounting and inventory management are essential components to all businesses, big and small. Unfortunately, small businesses have it tough considering that most enterprise software is just that: enterprise software.
We’ve been looking out for small product-based businesses for awhile now, helping our customers navigate the treacherous waters of the wholesale and eCommerce world. Here are our top 10 QuickBooks tips and best practices based on a variety of customer service issues we’ve helped alleviate along the way:
1. Create SKU’s for All Products and Product Variants
As your business grows, so will your customers. When you start working with bigger buyers, you’ll discover that they all require unique SKU numbers for every product you sell them. And yes, that includes variations. For example, a dress available in three different sizes should have three different SKU numbers (e.g. DRE-BL-S, DRE-BL-M, DRE-BL-L).
Not only are SKU’s important for your business relationships in the long term, but they’re extremely important to you in the back end. Organizing your inventory with SKU’s for products and its variants gives you the opportunity to have a true inventory count of your entire stock.
2. Accurately Track Your Inventory
Keep a proper, accurate tally of your inventory. We mentioned that establishing unique SKUs can provide you with a true inventory count – you can see exactly what you’ve got in the warehouse with a quick glance.
In addition to this, regular inventory audits are a must. Go through and physically count all of your products once per quarter. Never find yourself understocked and unable to fill an order.
Time and time again we come across businesses that jump straight from receiving an order to filling out an invoice. What this does is it deducts the required inventory from your books before you’ve physically moved the product leading to confusion and miscalculations later on in the ordering process.
Instead, before creating an invoice, you should create a sales order. It won’t deduct inventory from your books, eliminating the possibility of inventory discrepancies.
A sales order will just let you know that you need to fulfill a certain amount of inventory. Once you’ve made sure you have the stock and are ready to fulfill the order, you can create an invoice. After that, all that’s left to do is ship the order.
Having a single item listed twice (one for wholesale and another for retail) creates two completely different inventory stacks. We know what you’re thinking – that’s what you meant to do! But frankly, it isn’t in your best interest, especially when it comes to quickly and efficiently keeping track of your inventory.
The best thing to do in this scenario is to have one item listing with multiple wholesale and retail price levels. Then specify if those items are taxable or nontaxable at the order level.
Create and implement multiple price levels if you sell across different sales channels or to a variety of customer types.
For example, if you sell directly to consumers at retail pricing, and you also sell to brick-and-mortar shops at wholesale rates, you’ll want different price levels for each. Similarly, if you’ve got a single-site retail store that buys from you as well as a multi-site retailer to whom you’re offering better pricing, you will also want to establish different price levels.
It’s in your best interest to not create multiple SKUs with different prices. You’ll only make inventory management more complicated for your business.
QuickBooks comes equipped with two simple categorizations to help you identify similar data – classes and types.
Classes are used to distinguish different kinds of transactions, whereas types are assigned to individual jobs, customers and vendors. You’ll want to use classes to organize transactions related to different places, departments or types of business. It will make it much easier to sort through your books later on.
Purchase orders allow you to keep track of all of your orders with a specific vendor. We recommend always creating a purchase order (better known as a PO) each time you place an order with a supplier or a vendor. You should also create an additional document outlining your terms and conditions, as well as any other requirements (i.e. guidelines for defects).
The more information you provide on a PO, the safer you are from getting caught in a sticky situation with your vendor should anything go wrong. Your POs are essentially the prenups to your vendor and supplier relationships.
Remember to always include a start and end ship date and to state that you have the right to cancel the order if not delivered within the specified time frame.
After you receive inventory from your supplier or vendor, you should account for it in your system.
The best way to do that is to create a bill that adjusts your inventory for you (unless if you have Enhanced Inventory Receiving turned on).
A bill also allows you to keep track of what you owe your vendors and suppliers. You can reference your bills to see which of your terms are up and then you’re ready to pay, send a payment to your vendor by creatinga payment entry in your system. Utilizing this process will ensure your books stay up to date and enable you to keep track of your terms and payment due dates.
Too often, we encounter small business who don’t input different names for all of their customers, they’re simply labeled “customer.” This is a terrible practice because it completely handicaps you from being able to drill down into your customers to figure out who’s actually moving the needle for your business.
The ability to run detailed and granular reports only becomes more important as your business and sales grow. Differentiating all of your customers and categorizing their orders appropriately is the way to go.
Create a payment entry in your system whenever you send or receive a payment and apply it to the appropriate invoice or bill. Accounting is all about balance, so when using QuickBooks it’s key to maintain an equilibrium within the system by “accounting” for everything that happens from a transactional standpoint. Once you apply a payment to an invoice or bill, you can close them and complete that transaction.
The Bottom Line
Our QuickBooks recommendations come from the most common customer service issues we run into with our new customers. QuickBooks offers a wide range of features, so as a small businesses it’s hard to fully get a grasp of every functionality and how it’s actually beneficial to your business now and down the road.
Still, the best way to enhance and simplify the order process involves more than QuickBooks best practices. Order and inventory management apps like Lettuce make it unbelievably simple to manage your orders and save time processing them. You can easily sync with QuickBooks and conduct all of your important business functions in one simple, beautiful online application.
Nima Patel is a Growth Marketer at Lettuce, a simple inventory management tool made for e-commerce and wholesale. Her team writes about e-commerce, inventory management, and small business on the Lettuce blog. Say “hi” @nimapt.