QuickBooks for Manufacturing and Job Shops – 7 Things To Know
Whenever I hear QuickBooks and manufacturing in the same sentence, it gives me reason to pause.
It should do the same for you!
Unfortunately, confusion runs rampant about what QuickBooks can and can’t do when it comes to manufacturing businesses.
Many manufacturers purchase the Manufacturing and Wholesale Edition of QuickBooks with the belief that it will take care of ALL their needs. Sadly, this edition of QuickBooks can only cover a fraction of the needs and requirements for many manufacturers and job shops.
I have developed a list of seven (7) important things you should know relating to QuickBooks for manufacturing and job shops. Here they are…
#1 – QuickBooks does not support standard or landed costing systems for inventory or cost of goods sold (COGS)
QuickBooks Pro/Premier and Enterprise use average cost to value inventory and cost of goods when an item is sold. The platinum edition of QuickBooks Enterprise offers the Advanced Inventory feature, and FIFO cost is an option there. QuickBooks Online (QBO) offers FIFO costing for inventory valuation and COGS
#2 – Using sales orders in QuickBooks can streamline your operations
In many manufacturing businesses and job shops, there is often a time delay from when a customer order is received until the product is actually produced 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 integrated into your operations, 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 open, unfilled orders and the backlog in your business.
Need more than these reports? Be sure to check out my customized sales order report kit that offers you the ability to see open sales orders by item by customer or open sales orders by customer by item.
Note – Sales orders are currently available in QuickBooks Premier and Enterprise. They are not available in QuickBooks Pro or QBO at this time.
#3 – Using sales orders allows for the use of the Sales Order Fulfillment Worksheet
The Sales Order Fulfillment Worksheet provides a graphical overview of all open sales orders to see at a glance the “red/yellow/green” system in place. It looks like this:
Note in the upper right hand corner, you have the ability to sort the listing of orders many different ways. This tool provides the ability to see at a glance where bottlenecks may be occurring in your order fulfillment system.
Here are more things you need to know…
#4 – QuickBooks is clueless about shop floor planning, routers or 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 was never designed to be a full blown shop floor management package
#5 – Serial, Lot Number and Location tracking is NOT supported in most QuickBooks versions
The core inventory functionality within QuickBooks does NOT address any of these needs. While it is possible to create some custom fields, QuickBooks really doesn’t lend itself to tracking 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. If serial number, lot tracking or location functionality is a “must have” within your business, consider going to an add-on.
An add-on inventory management system for QuickBooks allows you to retain all your data and investment in QuickBooks. Other solutions that have advanced inventory capabilities typically force you to abandon your core accounting system as well. By carefully considering an add-on, you don’t have to write off your investment in QuickBooks.
#6 – Bills of Material are available in some versions of QuickBooks (well, sort of anyway)…
The Premier and Enterprise versions of QuickBooks offer functionality known as “inventory assemblies” (this functionality is NOT available in the Pro or Online versions). As you can see from the screen shot below, if your business has relatively simple bills of materials or the need to create assemblies or kits, QuickBooks can offer a great solution:
However, if your business also needs:
• Requirements/shortages reporting
• Multiple level bills of material
• Required assemblies in all open sales orders
you will likely find QuickBooks lacking in these areas.
#7 – Need to track profit and loss by Department, Region, Division or Other Line of Business? Use the class feature in QuickBooks
Deep within the preferences of QuickBooks (all versions), there is a feature called “Class Tracking”. It is NOT turned on by default. However, once activated, it can provide a simple way for your business to prepare a segmented profit and loss report.
In the example below, you can see that each “class” gets its’ own column in the Profit and Loss Report for easy review:
Need help figuring all this out?
Take advantage of my 30+ years of manufacturing, QuickBooks, and inventory experience. It also includes 10+ years as CFO for a $15 million manufacturing firm!
Need setup or training? Let’s talk.
I can also help you sort out of the QuickBooks add-on marketplace when it comes to manufacturing, distribution and/or job shops.
Clients really like my value-priced mini-needs assessment service to help you save time on your initial search. I also offer a more comprehensive needs analysis service for more complicated environments.