QuickBooks Tip: How to Setup Inventory to Track Cost of Goods Sold

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QuickBooks is a software program created to help with bookkeeping. QuickBooks has quickly become the “go-to” for SME business bookkeeping. It uses a combination of processing principles associated with accounting, while also providing a user-friendly interface. This software helps eliminate issues like inventory miscalculations and payroll dilemmas with its simple and easy to understand format. In order to understand the vast span of its capabilities and how these improve a business’ accuracy, we must first highlight the reasons why we like it so much in the first place.  
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One of the key aspects to remember while using QuickBooks is that all inventory items recorded in this software must be billed for, or at least checked-in, in order for the system to populate a complete and correct list of your inventory. Ensuring that all your inventory is accounted for helps it recall your products with accuracy and effectively return precise data that will shape the picture of your stock levels. Any changes that it carries out on these lists are made for the purpose of eliminating discrepancies to lower your error margin. The Inventory Asset Account (a record of all your transactions), is a feature that helps you keep track of all purchases made. This way, whenever an item from the list if sold, the cost of goods is spawned, and the inventory asset amount is deducted.
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The Profit and Loss Report is another feature that can help you keep track of the costs of inventory. It eliminates over-stated costs of goods, leaving you with an exact reflection of your overall inventory amounts. Carefully review the items in the report, particularly focusing on the cogs. You should also trace and eliminate all irregular posting. QuickBooks also offers a Profitability Report, which states the details of items, products, and sales.  With this feature, any entry that appears to cost more than it does can be traced.

With such powerful features as the ones listed above, businesses can focus more on the details. These features allow them to seek improvement and above all, grow and develop. However, the integration of this system is not enough on its own. The method of its application must be considered, as well.

Always keep in mind that QuickBooks utilizes the average cost method of determining cogs. This means it assumes the cost of inventory is an average of the cost of goods available for sale during a particular period. Therefore, if the cost of a particular item is incorrect, then the use of this cost must be discontinued, and an accurate amount must be entered. Otherwise, it would take ages for the system to balance itself out. Check out America's Best Bookkeepers

There are other benefits to using QuickBooks for inventory besides tracking the cogs. QuickBooks may also be used to track the sales of products that are activated. This will clue you into inventory that is stagnant, or not being moved. The software serves as a detailed and authentic picture of your inventory, as well as facilitates the meeting of your goals by giving you many different report options.

Tracking inventory is an important part of business operations that enables you to stay on top of your assets and stocks. This practice also keeps tabs on your business’ performance and promotes the proper tracking of orders and upcoming deadlines. It displays if a business is making money or not from a product and allows the business owner to decide whether to continue selling it.  Setting up your inventory to integrate QuickBooks is a highly practical solution to boost the awareness and efficiency of your business.

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