In this tutorial, we’re going to cover how to set up your products and services list in QuickBooks Online. We’ll teach you how to create products and services manually and then teach you how to import products and services from an Excel or comma-separated values (CSV) file.
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The Importance of Setting Up Your Products and Services List in QuickBooks Online
You should set up a product or service item in QuickBooks Online for anything you sell to your customers, as well as any products you buy, even if not resold. The information you use to set up products and services becomes the default information when you create sales and purchase forms, but you can change the information before saving any transaction.
Setting up your products and services list will allow you to do the following:
- Create invoices and purchase forms quickly that will populate the description and price for the product or service automatically
- Keep track of your sales by product or service
- Keep track of your costs by product
- Keep track of the quantity of inventory on-hand so that you never run out
- Allocate the cost of purchasing inventory between the cost of goods sold (COGS) and ending inventory automatically using the first-in, first-out (FIFO) method
Gather Your Information: Products and Services Checklist
Plan on spending considerable time gathering the necessary information to complete this tutorial. The time you spend now gathering your product and service information will be recouped easily when you can create detailed invoices, record purchases, and track your inventory effortlessly at a glance.
It’s best to gather the information in a spreadsheet with one row for each product or service and a column for each piece of information gathered. The second part of this tutorial will guide you through importing your spreadsheet of products and services automatically into QuickBooks. You don’t need to import all items at once. You can import multiple spreadsheets, which will add to your existing list of items.
Information for Products You Buy or Sell
Include all products you buy and/or sell, even if you don’t need to keep track of exact quantities, such as nuts and bolts. Be as detailed as possible. For example, don’t have one item for “sinks.” Instead, have separate items for each model of sink you buy and sell. Collect the following information on your products, preferably in a spreadsheet:
- Name of product
- Description of product to print on sales forms
- Description of product to print on purchasing forms
- Stock keeping unit (SKU) number (optional)
- Price at which you wish to sell the product
- Current price at which you can buy the product
- Preferred vendor for purchasing the product
- Whether the sale of the product is subject to sales tax
- If you wish to keep track of the quantity of this item, you need:
- Initial quantity on hand prior to starting to use QuickBooks
- Quantity at which you wish to reorder the product
Information for Services You Sell
You’ll need the following information for all services that you sell:
- Name of service
- Description of the service to print on sales forms
- Sales price or rate you wish to charge customers
- Whether the sale of this service is subject to sales tax
- If you purchase the service from a subcontractor:
- Description of service to print on purchase forms
- Cost charged to you by the subcontractor
- Name of preferred subcontractor
Setting Up the Product and Services List in QuickBooks Online
Before importing a spreadsheet of products and services, I encourage you to follow these instructions and add a few products and services by hand. Entering a few by hand will give you a better understanding of the information collected and where it can be accessed in QuickBooks.
Products and services can be added to QuickBooks Online in four steps:
- View the product and services list by hovering over Sales in the left menu bar and then clicking on Products and Services.
- Click on the green New button in the upper right corner of the screen.
- Select whether the item you are adding is Inventory, a non-inventory product, a service, or a bundle of products or services.
- Complete the information requested for the item type you are adding, and then click Save and close.
The next sections provide more detail and illustrations for adding products and services to QuickBooks Online.
Navigate to the Products and Services List
After you sign into your QuickBooks Online account, select Sales in the left menu bar and click on Products and Services:
Create New Item
From the products and services screen, click the green New button in the upper right corner to create a new product or service item:
Select Item Type
The Product/Service information screen that appears after clicking New provides the four types of items that can be created for products and services:
A. Setting up an Inventory Item
Select this option if you need to track cost and quantity of items that you buy and sell. Inventory items allow you to keep an eye on stock levels as items are sold so that you know when to place an order with the supplier.
After clicking on Inventory (A) in the above screenshot, you’ll be able to provide the inventory details below:
By completing as many fields as possible while setting up the inventory item, you’ll be able to issue purchase orders and generate invoices with very little data entry required. Here is a brief description of the available fields for inventory items:
1. Name: Give the item a name for your internal use that will help distinguish this item from others.
2. Picture of item: You can upload a picture of the item.
3. SKU: You can record the product’s SKU number.
4. Sub-product: You can organize inventory items into groups of similar products. For instance, you might create a parent inventory item for “Sinks.” Each different type of sink would then be a separate inventory item and designated as a Sub-product of Sinks. You wouldn’t use the parent inventory item of Sinks for any purchase or sales transactions, and it wouldn’t have any quantity information. It would only be used to group the Sub-product items together.
5. Class: You can separate your business activity into several different classes that allow you to evaluate profit and loss separately. For instance, a plumbing company might create classes for new construction and repairs. You should leave the Class field blank if the inventory item you are setting up might be sold in multiple classes. In that case, you’ll need to identify the Class separately on each invoice. If the inventory is used only in one Class of the business, you can designate that class here, and it will auto-populate on invoices.
Enable class tracking: If the class field does not appear in your QuickBooks Online, you need to enable class tracking when setting your advanced options.
6. Initial quantity on-hand: Report the number of units on-hand for this inventory item. Only report units here where the purchase of the inventory will not be recorded in QuickBooks, such as if you’re moving to QuickBooks from another bookkeeping software. This is a required entry, so if you don’t have any units on-hand, you must enter zero. You’re also required to enter the date you measured the units on-hand.
7. Reorder point: Specify the number of units on-hand that should trigger the ordering of additional inventory.
8. Inventory asset account: Specify the balance sheet account you would like to use to track the cost of this inventory item. Most businesses use only one inventory asset account. I recommend using “Inventory Asset” for all your inventory items, which is the default balance sheet inventory account created by QuickBooks Online.
Do not change asset account: Do not change the inventory asset account for an inventory item after it has been created as this can cause inaccurate inventory cost calculations.
9. Description (sales forms): Enter a default description of the product that you would like to appear on sales forms like estimates and invoices.
Scroll down on the screen above to reveal these additional inventory details to input:
10. Sales price/rate: Enter the standard sales price for this product. If needed, you can change the sales price when creating an invoice.
11. Income account: Specify the income statement account to record the revenue from this inventory item. I recommend that all inventory items use the Sales of Product Income account, which is the QuickBooks default. There is no need to create additional income statement accounts for each product because you can print reports that show income by product item.
12. Sales tax category: Specify whether sales of this product is subject to sales tax.
13. Purchasing information: Enter a description of the product that should appear on purchasing forms like purchase orders.
14. Cost: Input the standard purchase price per unit for this product. You can change the purchase price when you input bills or purchase orders.
15. Expense account: This is the income statement account to report the expense from the purchase of this product. I recommend all inventory items use the QuickBooks default account, Cost of Goods Sold.
16. Preferred vendor: You can specify a preferred vendor for purchasing this product. This will auto-populate any purchase orders for this product but can be changed if the purchase order is to a different vendor.
B. Setting up a Non-inventory Item
Select the non-inventory option from the product/service information screen if you need to track the cost, but not quantity for items that you buy or sell. Non-inventory items include things like supplies and special order products.
After clicking on Non-inventory (B) from the product/service information screen, you’ll be able to provide details for the non-inventory item. Most of the information collected is the same as for inventory, so the numbers in the screenshots below correspond to the descriptions given above:
The information collected for non-inventory items is the same as inventory items discussed in the previous section, with the following exceptions:
- Non-inventory items do not require any quantity information
- Non-inventory items are not assigned an inventory asset account
- Non-inventory items are assigned to a variety of expense accounts, not only COGS
- While products sold to customers should go to the COGS account, other products, like office supplies, should be assigned to other expense accounts.
C. Setting up a Service Item
Select Service (C) for services that you sell to customers. Plumbing, bookkeeping, and housekeeping services are examples of service items.
The fields that should be completed for a service item are described below:
- Name: Enter the name of the service for your internal use.
- Picture: Attach a picture if you wish.
- Sub-service: As with inventory items, you can create sub-services grouped under a parent service. If this is a sub-service, select the parent service here.
- Class: If your company separates income and expense by class, designate the class for this service item. Leave the field blank if this service can be assigned to multiple classes.
- Description: Enter a description of the service that you would like to appear on sales forms, such as invoices
- Rate: Input the rate you charge customers for this service. This can be either an hourly rate or a flat rate charged per engagement. The actual amount charged can always be changed on an invoice.
- Income account: Select the income statement account that you want to use to track income for this service. It’s not necessary to create an income account for each service since you can easily view income by service items.
- Sales tax category: Indicate whether this service is subject to sales tax.
- Purchasing information: Leave this area blank if employees perform the services. If you purchase the services from a subcontractor, check the box and provide a description, cost, expense account, and preferred vendor.
D. Setting Up a Bundle
A Bundle is a combination of products and services that often are sold together. Bundles have no quantity on hand. They are a convenient way to record the sale of multiple products and services at once. Prior to setting up a bundle, you must create all the inventory, non-inventory, and service items that will be part of the bundle.
After clicking Bundle (D) on the product/service information screen, you can enter the following information:
- Name: Provide a name for your bundle of products and services for your internal use.
- Description: Provide a description of the bundle to appear on invoices to customers.
- Display components: Check the box if you wish to display the detail of the products and services composing the bundle on invoices to customers.
- Product/Service: Choose the product and service items, along with their quantity, to include in the bundle. All product and service items must be created prior to assigning them to a bundle.
Run Products and Services List Report
Once you have added all of your products and services, you can run a report to see the entire list. From the Products and Services screen, select the drop-down menu next to More in the upper-right corner, then click on Run Report as indicated below.
A report similar to the one below should display on your screen and be reviewed for accuracy:
How to Modify a Product or Service on the List
You can modify a product or service that you previously set up. Locate the product or service you want to edit on the Product and Services screen. Click the Edit option on the far right side of the item’s information and make any necessary changes.
How Do You Delete a Product or Service from the List?
You cannot delete a product or service from QuickBooks once you have used it in a transaction like having created an invoice for a customer. However, you can inactivate an item that you no longer need. Inactive items will no longer appear on the products and services list but will still appear in financial reports if used in a transaction.
To inactivate an item, click the drop-down arrow next to the Edit option and select Make Inactive. This item will no longer appear on the products and services list.
How to Import Product and Service Items
It is much quicker to enter product and service details into a spreadsheet than to use the data input screens in QuickBooks Online. I recommend doing the first few items manually, as shown above, to become familiar with the requested fields. However, if you have many items, it will be much faster to enter the data in an Excel spreadsheet and import the spreadsheet following these instructions.
Product and service items can be imported into QuickBooks in four steps:
- Create a spreadsheet with a row for each item and a column for each field.
- Initiate the import from the products and services screen by clicking on the drop-down arrow next to New and selecting Import.
- Select the spreadsheet to import and map its columns to QuickBooks fields.
- Review the data and then click Import.
Prepare Your Spreadsheet
Your spreadsheet should have one row for each product or service item you wish to import. Each column represents a field to be imported into QuickBooks Online. The first row of your spreadsheet should contain labels for each column, but the labels don’t have to match the field names from QuickBooks Online. You’ll be able to map each column to a particular field in QuickBooks during the import process.
Below are the fields that can be imported for products and services. You can review a more detailed description of the fields in the section on how to enter product and service items manually.
- Product/Service name
- Sales description
- Type (Inventory, Noninventory, or Service)
- Sales price/rate
- Taxable (Yes/No)
- Income account (must be set up in chart of accounts prior to import)
- Purchase description
- Purchase cost
- Expense account (must be set up in chart of accounts prior to import)
- Quantity on hand (inventory items only)
- Reorder point (inventory items only)
- Inventory asset account (inventory items only and must be set up in chart of accounts prior to import)
- Quantity as-of date: (inventory items only)
You only need to include columns for which you want to import information. It is fine for some columns to be missing. Your spreadsheet should look something like this:
Use the first tab: Only the first worksheet (or tab) within an Excel workbook will be imported. Ensure your worksheet is located on the first tab in the lower-left corner of your Excel file.
Upload Your Excel or CSV File
From the Products and Services screen, click on the drop-down arrow next to New in the upper right corner and select Import:
From the Import screen, click Browse and select the Excel or CSV file you wish to import:
After selecting your file, click on the green Next button in the bottom right corner of the screen.
Map Your Columns to QuickBooks Fields
This screen allows you to decide which of your columns will import to each field collected by QuickBooks Online:
In the left column are the fields available for import into QuickBooks. The right column tells QuickBooks which column in your spreadsheet holds the information for that field. If one of the QuickBooks fields on the left is not in your spreadsheet, indicate No Match—as done for the Income Account in the example above.
Once you have mapped all of your columns to QuickBooks fields, click the green Next button in the bottom right corner of the screen.
Review your Data
The final screen allows you to review your data that will be imported into QuickBooks Online. You can make any last-minute changes directly on this screen. The number of products and services to be imported should equal the number of rows in your spreadsheet, minus one for your header row:
After reviewing your information, click the green Import button in the bottom-right corner of the screen to complete the import. You should receive a message that the import was successful, and the new items will appear on the Products and Services screen.
You now know how to set up product and service items in QuickBooks Online. The next tutorial in our QuickBooks Online Training Course is How to Set Up Customers in QuickBooks Online. In that tutorial, you will learn how to set up contact and payment information for your customers.