How to Count Inventory Using QuickBooks
Sooner or later, you’ll have to put on your dust mask and take a physical count of your inventory. Staying on top of your inventory is key to running a successful business, and QuickBooks can help! Here’s how you do it.
During the physical count, you’ll want to “freeze” your inventory so you won’t affect the counts during that time. You’ll need to handle your transactions differently to ensure an accurate count. Keep the following in mind when counting inventory:
- Make sure to record the receipt of items in QuickBooks that are already on your shelves, if you haven’t already. And make sure to record any sales of items in QuickBooks, if not already recorded. This ensures the on-hand quantities will be current and correct.
- Don’t fill out an item receipt or enter a bill for received items until after the inventory count is completed.
- If you receive any inventory items during the count, leave them in their boxes; don’t unpack and place them on the shelves.
- Hold off on shipping items to customers until after the count.
- If you enter invoices or sales receipts during the count, mark them as “pending.” Before saving the invoice or sales receipt, go to the Edit menu and click Mark Invoice As Pending (or Mark Sales Receipt As Pending). Then save the form. When you’ve completed the inventory count, edit the invoice or sales receipt and then go to Edit. There, click Mark Invoice As Final (or Mark Sales Receipt As Final).
- If you run a retail store, perform the inventory count during off hours or slow periods.
Just before you’re ready to start the count, you can generate and print the worksheet.
If you have a large warehouse that might make counting inventory seem overwhelming, you can create a custom field for inventory items, for example, to specify the location or bin number where the item is stored.
To add a custom field, follow these steps:
- Click Items & Services on the Home page.
- In the Item List, double-click an inventory part item to open it.
- Click the Custom Fields button.
- On the window that appears, click Define Fields.
- Click in the Label field and type the name. Then click to check the Use column.
Type a label name for the field and click in the Use column.
- Click OK until you see the Custom Field window with an empty field ready to be filled in.
- Type the bin number or location, such as Aisle 2, and click OK.
- Click OK to go back to the Item List.
- Back at the Item List, double-click each inventory part item to add the information to the new custom field. In the item window, click Custom Fields, type the location, and click OK.
- Click OK to save the edited item.
- Repeat steps 9 through 10 for each inventory part item.
Before printing the worksheet, you can add a custom field as a column, such as the Location field described above. You can remove columns you don’t really need, for example, the Preferred Vendor column or the Quantity On Hand column. Remove the Quantity on Hand column if you’re not doing the inventory yourself. The counters don’t need to know the amount on hand, and it may tempt them to pocket any items over the amount instead of accounting for them. Finally, you can sort the report by item name or by some other column, if you organize your stock alphabetically or numerically, or by Location or Bin Number so your counters can easily and efficiently find the items.
Just before counting your inventory, generate and print the Physical Inventory Worksheet:
- Go to Reports, go to Inventory, and then choose Physical Inventory Worksheet.
- To change the columns that appear on the report, click Modify Report at the top left of the report.
The Modify Report window.
- On the Display tab, click a column name to add or remove it from the worksheet. A check mark indicates that the column will appear in the report. To remove the Quantity on Hand column, click it so that it doesn’t have a check mark next to it.
- Custom fields are listed at the bottom, so scroll down to the bottom of the list of columns. Put a check mark next to the custom column(s) you want to appear in the worksheet. (You might find two columns named the same if you set up a custom field—for example, Location may appear twice. Pick the one closest to the bottom of the list.)
- To sort the worksheet alphabetically click the Sort By menu and choose the column to alphabetize—for example, By Item if you organize your stock room by item name.
Choose the column to sort the worksheet by.
- Click OK to display the worksheet with your new settings.
The Physical Inventory Worksheet.
- When you’re ready to start counting, click the Print button to print the worksheet to give to your counters. Type the number of copies you need.
Note that, by default, the worksheet shows only active inventory items. If you want to also include both active and inactive items, you need to change the setting. In the Modify Reports, Status filter, click All.
You can use the Physical Inventory Worksheet as you walk around your backroom or warehouse to count the inventory you have. The worksheet lists your items and has a place where you can write down the actual count.
Remember, QuickBooks does a great job of tracking your purchases and sales of your inventory items, but QuickBooks isn’t psychic. Using QuickBooks to keep track of your inventory will streamline your business and save you from a lot of headaches down the road. Good luck, and happy counting!
by Barbara Harvie