Whenever I hear “QuickBooks” and “manufacturing” in the same sentence, it gives me reason to pause.

It should do the same for you!

Unfortunately, much confusion exists about what QuickBooks can and can’t do when it comes to manufacturing businesses.

Many manufacturers purchase the Manufacturing and Wholesale Edition of QuickBooks and think it will take care of ALL their needs. Sadly, this edition of QuickBooks covers just a fraction of their actual needs.

THINGS TO KNOW ABOUT QUICKBOOKS FOR MANUFACTURERS…

• QUICKBOOKS PRO/PREMIER/ENTERPRISE (SILVER AND GOLD) ONLY SUPPORT AVERAGE COSTS

For many businesses, the use of average cost to value inventory and record cost of goods sold is perfectly acceptable.

For others, they have a need for FIFO, specific, landed, or other type of inventory costing system. In the event that average costing is not acceptable, but your business wants to use QuickBooks for its’ accounting, you will want to look into add-ons for QuickBooks that do support your desired costing method. The Platinum subscription to QuickBooks Enterprise includes the Advanced Inventory module that has FIFO cost capabilities.

• USING SALES ORDERS IN QUICKBOOKS CAN STREAMLINE YOUR OPERATIONS

There is often a time delay from receipt of customer order until products are actually made and shipped. I have seen a number of crazy methods developed to track these open orders.

My suggestion is to use the sales order functionality within the Premier: Manufacturing/Wholesale and Enterprise: Manufacturing/Wholesale versions of QuickBooks.

Once sales orders are up and running, QuickBooks provides two very handy reports – Open Sales Orders by Item and Open Sales Orders by Customer. Both of these reports make it easy to keep an eye on unfilled orders and the backlog in your business.

Check out my guide that explains how sales orders work in QuickBooks.

MORE THINGS TO KNOW ABOUT USING QUICKBOOKS IN A MANUFACTURING BUSINESS

• QUICKBOOKS IS CLUELESS ABOUT SHOP FLOOR PLANNING, ROUTERS, AND OTHER MANUFACTURING PROCESSES

Sorry to toss cold water on the discussion at this stage, just as you were getting excited about the use of sales orders!

A key point to remember is that QuickBooks is an accounting software package with a limited number of features baked in to assist manufacturers and job shops. It does not qualify as a full blown shop floor management package. If this type of functionality is needed, the only option is to purchase an add-on solution for QuickBooks.

• SERIAL/LOT AND LOCATION TRACKING – NOT SUPPORTED IN MOST VERSIONS OF QUICKBOOKS

The core inventory functionality within QuickBooks does NOT address any of these needs. While it is possible to create some custom fields within QuickBooks, that can be a clunky way to track information related to serialization, lot numbering or location.

The Platinum subscription of QuickBooks Enterprise provides the Advanced Inventory module. This module does provide for location tracking and serial OR lot number tracking, but not both.

• QUICKBOOKS DOES NOT DO A HARD ALLOCATION OF ITEMS ONCE ORDERED

QuickBooks provides a “soft allocation” of inventory. When you create sales orders or assemblies in QuickBooks, they show as “allocated” on the stock status report. QuickBooks removes items from inventory upon creation of the invoice or completion of the assembly.

However, many firms need what is known as a “hard allocation”. This is where the quantity on hand is decreased and items taken out of stock and allocated specifically to an order/build. None of the versions of QuickBooks (Pro, Premier or Enterprise) offer the ability to do a hard allocation.

NEED HELP SORTING IT ALL OUT?

Get the help you need to determine fact from fiction and the insights you need to make informed decisions for your business.

I’ve been helping manufacturing businesses with their QuickBooks, finances, and inventory for 35 years, and welcome the opportunity to help you too! Contact me today…