Is That a Basket or a Bike?

Is That a Basket or a Bike?Some questions come up from Webgility customers repeatedly, including this one: “Can you explain the different item types and how they are classified in my online store in QuickBooks?”

QuickBooks gives you a few options in the desktop software, where you can have inventory parts or non-inventory parts. Inventory parts are going to end up on your inventory asset account and you get to select where they’re going to show up as an asset type. Then every sale is going to take one item out of the asset account and put it in your cost of goods sold.

A non-inventory part is typically a smaller-dollar item of a fairly large volume that you do not stock, like screws that are going into a bigger product.You probably don’t want to track all those individual screws, so often those are considered a non-inventory part and you’ll just purchase them as expenses. 

Two other options, depending on your business and your need for them, is to label inventory items as a group or an assembly. With a group, often you will sell the individual item, or you can sell it as part of a group, like maybe a gift basket—one jar of jelly here, two boxes of tea there. When they’re grouped together and purchased as one unit, you might offer a discount.

An assembly item is not as common. That’s really when you’re building a finished product from your existing raw material parts, or maybe it’s an item you need to add services to. An easy way to tell the difference? If it can easily be taken apart and put back as individual items, like a gift basket, it’s probably a group. If it’s almost impossible to take it apart and sell as parts, like a bike, then it’s probably an assembly.

So if it’s a screw, it’s a non-inventory part. And if it looks like a basket and sells like individual items, it’s a group. But if it acts like a bike and it’s not likely that you can put it together to work properly, it rides into the sunset as an assembly. 

– By Chris Robinson, Webgility QuickBooks ProAdvisor