Once you know how to track and manage inventory in QuickBooks Online you’re ready to start analyzing inventory in QuickBooks Online.
This means we’re going to look at some reports.
There are two key reports you are going to want to start looking at:
- Inventory Valuation Summary
- Sales by Product / Service Summary
As the titles suggest, the valuation summary gives you a look at what you have on hand (what you own). The Sales by product shows you what is selling, but it also gives you some very useful data – The COGS, Gross Margin and Gross Margin % for each product.
Analyzing Inventory in QuickBooks Online – Inventory Valuation Summary
This is where you look to see what you have in inventory. As the business owner you have a very good and reliable sense of whether or not this looks right.
- Export the report to Excel or Google Sheets.
- Right away you can start cleaning things up from this report.
- The first thing I do is sort it by quantity. Look for the negative quantities. This could suggest we’re missing purchases? Or PO’s didn’t get turned into bills? Were those bills paid? If so we need to find those payments, and see how they were recorded, if not to the bills.
- Next check the 0 quantity items. Look at the items. Is there anything here that you know you have stock in?
- Then go right down to the items with the largest quantities. Does this look right? Should you have this much stock in these items?
It’s a bit subjective, but in my experience the business owner has a really good sense of what does or doesn’t look right. You know your products, and you have a sense of what sells and what doesn’t.
If the quantities do look right, you might want to look at the items you have a lot of stock in.
What is the turnover rate on these items? Are you at risk of overstocking? Should you run a promotion and blow out some of that inventory?
It may be fine. You may be stocking up for your busy season. There is no right or wrong answer on this stuff. Analyzing inventory in QuickBooks Online is about looking at it with an open mind. Don’t assume it’s right, and don’t assume it’s wrong. The goal is to make sure we can explain it, whichever way it goes.
Analyzing Inventory in QuickBooks Online – Sales by Product / Service Summary
- I also dump the sales by product / service summary into Excel (and then convert it to Google Sheets).
- Next I add in a column that calculates the COGS/unit for each item. It’s a good double check. As a business owner you will know when one of these doesn’t look right. I wouldn’t. That’s why it takes the accountant AND the business owner to analyze this stuff properly.
- Sort it first by Quantity. You want to see what your top selling item is.
- Then sort it by Gross Margin %. You want to see what your most profitable item is.
In the video here you’ll see that I’ve identified several items with a high profit margin but low sales volume. These are the products we want to sell more of. Higher sales volume on these products will translate to more dollars right to the bottom line.
This is just a start, but it should give you a very good start at analyzing inventory in QuickBooks Online. Even if this is all you did each week / month, you will be on top of things.
In this market you have to be fast, and you have to stay ahead.
Analyzing inventory in QuickBooks Online means looking at reports. In order for the reports to be useful, your data needs to be timely and accurate. That means good bookkeeping all around.
Not sure if your bookkeeping is there? Want help getting this analysis going for your eCommerce company? Contact us. Let’s get the conversation started!