Comparing Assemblies Across Software – Part 10

by

Each week, our "Warehouse Wednesdays" features a topic dealing with inventory, manufacturing or warehouse management. For the last 10 weeks or so, give or take a week off here and there, I've been writing a miniseries comparing "assembly (type) items" across different software with QuickBooks desktop products. 

Even though we've previously looked at SOS Inventory that works with QuickBooks, we're going to look at QuickBooks Online. Now, I know what you're thinking, “Murph has gone totally nuts. No version of QuickBooks Online offers assemblies, so why is he comparing QBO to the other software in this series.”

You just made my "case and point" for me. QuickBooks Online doesn’t offer assembly items (in any version), and so it isn’t really intended for manufacturing purposes, even light manufacturing, or is it? 

It might be possible to use the new "Bundles" item in QuickBooks Online Plus (or Essentials) in lieu of assemblies by a small manufacturer. To explore this possibility, we must look at the various types of Product/Service types QBO offers.

QBO Product/Service Types

The figure below shows the various QBO Product/Service item types. The red box surrounds the Inventory item types. Inventory items are product you buy and/or sell and that you want to track quantities of and costs for. Inventory in QBO is valued based upon the first-in, first-out (FIFO) costing methodology.

The blue box (in the figure above) surrounds Non-Inventory items that represent products you buy and/or see, but for which you have no need to (or can’t) track quantities of. The example QBO provides is that of "nuts and bolts used in an installation."

Services, surrounded by the orange box (in the above illustration), represent those services you provide to customers. QBO provides two examples, landscaping or tax preparation services.

And the newest edition to the QBO Plus line up of Product/Services is the Bundle type item, outlined in green (above). Bundles in QBO represent a collection of products and/or services that you sell together. For example, a gift basket of fruit, cheese and wine.

Creating QBO Inventory Items

Within QBO, select the Company Gear icon, and then choose Product/Services. Now select New and choose Inventory. You can see in the example below, we have created an Inventory item called "Alloy Round Cold Finished Annealed:" 

This item is assigned to the Inventory Asset account, Sales of Product Income account and Cost of Goods Sold expense account. Our sales price is $60 and the cost is $29.11. 

Creating QBO Non-Inventory Items

Within QBO, select the Company Gear icon, and then choose Product/Services. Now, select New, and then choose Non-Inventory. In the example below, we've created a Non-Inventory type item for Assembly Supplies. This item has a Sales of Product Income account, and a Cost of Goods Sold Expense account. The item cost is $10, while the item sales prices is $20.

Creating QBO Service Items

Within QBO, select the Company Gear icon, and then choose Product/Services. Now, select New, and then choose Service. In the example below, we've created a Service type item for Assembly Labor. This item has a Service Income account, and a Cost of  Labor Expense account. The item cost is $100, while the item sales prices is $45.

.

Building QBO Bundles

Within QBO, select the Company Gear icon, and then choose Product/Services. Now, select New, and then choose Bundle. (See the figure on next page for No.s below.)

  1. When creating a new Bundle, give it a Name that fits your company’s product and service schema.
  2. Choose to either display bundle components – or not. When viewing an Invoice, the items listed within the bundle will be displayed: If you have selected the option to display the bundle components or if you have not chosen the display option. Only the name of the bundle will be displayed on the invoice, and the components will be used only for calculation purposes.

So, your tendency might be to jump ahead and simply select the components of your bundle as in the example below:

If we look at this bundle when it's added to an Invoice (see below), we can see all the various components, including Inventory items, non-inventory items and even Services for assembly labor, etc. It looks a lot like an assembly bill-of-materials, doesn’t it?

But there's only one problem with this. Bundles are not trackable. When you sell a bundle in QBO, they impact your inventory in the same way "group items" impact inventory in QuickBooks (Desktop).

Each inventory item is reduced from inventory at the time the bundle is sold and the bundle as a whole isn’t tracked at all. We have no way of knowing the total number of any specific bundle we sell over the course of time.

Tracking Trick for QBO Bundles

Fortunately, there is a little trick you can incorporate into QBO Bundles to track the "bundle as a whole," and even give you the "stock on hand" for that bundle.

First, create a new Inventory item. Let’s call it "Small Trailer-Tracking Item," and both the Quantity on Hand and Cost will be Zero. 

The price can either be zero or some "mark up" amount if you choose to use one. We want to code this item like any other Inventory Item from an accounting standpoint, even though the Inventory asset and COGS accounts always will reflect $0 for this item. The reason is that we still are tracking the other "bundle components" in their normal manner.

Now, add this "dummy tracking item" as the first line of our Trailer Assembly Bundle from earlier (shown in the green colored box illustrated below). 

We will not use this inventory item for any other purpose other than to use for this "bundle," and to make "inventory adjustments." By doing this, we always can see the number of Small Trailer (tracking) items we sell, and the number we have on hand. 

If you "pre-bundle" your items together prior to the time of the sale, you may want to record an inventory adjustment to simply increase the number off tracking items – in this case Small Trailer.

No, this doesn’t relieve your inventory of the components like an inventory build, but it does at least allow you to know the number of "pre-bundled" items available to sell. 

Because you left the "cost" value at $0, you're not changing the value of your inventory either by adding these quantities, nor will it impact the "off-set" account you choose to use when making those inventory adjustments.

Tracked Bundles on Invoices & Reports

In contrast to the earlier Invoice we showed you, the Invoice below now includes our Small Trailer-Tracking Item (in the green box) with a quantity of one. This is going to give us a history of the quantity of Small Trailer Bundles we have sold.

The invoice below has had price changes to reflect a 25 percent mark up in the sales price:

As an option, you could have incorporated any mark up amount you wanted as the price of the tracking item. In this way, you clearly would see the value of your mark up for the bundle as a whole.

As you can see, if we run a Sales by Product/Service Detail Report, we can see our "bundle" now shows up because we included our "tracking item" (shown in green). Both invoices show up in our sales report.

Conclusion

While QuickBooks Online doesn’t really offer "assemblies," it does offer a pretty nice "kitting" feature in the form of Bundle items.

If you set up a no-cost inventory item for each bundle, you then can track the actual bundle sales by quantity and, with the appropriate and timely inventory adjustments using that tracking item, keep a record of your pre-bundled quantity on hand. 

As an option, you can choose to enter a mark up or overhead amount in the sales amount of your tracking items, so that you can easily see the mark up for the bundle as a whole, as opposed to the individual components.