Welcome to the Fit Small Business QuickBooks Online training course! In this lesson, we’re going to cover how to set up your products and services list in QuickBooks Online.
To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin!
Before we get started with the lesson, it’s worth mentioning that there are affordable virtual bookkeepers that can set-up and manage your QuickBooks for you. They will even help you get caught up if you are behind. For example, SmartBooks offers help with cash flow management, monthly financial statements, payroll processing and more starting at $250/month. Get a free consultation to learn more.
Why is it Important to Set Up Your Products and Services List?
If you invoice customers for products and services sold or if you need to keep track of inventory cost and quantities, then it’s important that you set up the Products and Services list in QuickBooks Online.
Setting up your products and services list will allow you to do the following:
- Quickly create invoices that will automatically populate the quantity, description, and price for the product or service fields on the invoice.
- Keep track of your sales by product or service. This will allow you to gain insight about what products are selling versus what products are collecting dust on the shelf.
Next, we’ll walk you through the set up process.
How Do I Set Up the Product and Services List in QuickBooks Online?
Step 1 – Navigate to the Products and Services List
After you sign into your QuickBooks Online account, click on the Gear icon located to the left of your company name. Select Products and Services right below the All Lists menu column as indicated below:
Step 2 – Create New Item
From the Products and Services list, click the Blue button in the upper right to create a new product or service item, as indicated below.
Step 3 – Select Item Type
When you create a new item in QuickBooks Online, you have 3 options to choose from:
Setting up an Inventory Item
Select this option if you need to track cost and quantity for items that you buy and sell. Setting up inventory items will allow you to keep an eye on the inventory stock level as items are sold. By doing so, you will be able to keep track of when you are running low on an item so that you can place an order with the supplier before you run out.
The fields that should be completed for an Inventory Item Set Up are as follows:
- Name – Put the name of the item in this field
- Picture of Item – Upload a picture of the item
- SKU – If you keep track of inventory by SKU then you can enter that info in this field
- Category – This field allows you to categorize inventory items. For example, if you sell T-shirts then you can set up a T-Shirts Category and then set up the items that would fall into that category like Mens T-shirts, Ladies T-shirts, Kids T-shirts.
- Quantity On-hand – Put the current quantity that you have in inventory.
- Inventory Asset Account – QuickBooks will automatically assign this account to inventory items. A Word of Caution: Do not change this account or it could result in inaccurate quantity/cost calculations.
- Sales Information – Put the description of the item that you want to appear on your customer’s invoices and sales receipts. Typically this will be the same as the info you entered for the item Name.
- Sales price/rate – Enter the price that you sell this item for.
- Income account – This is the account where you want to track your income for this item.
- Purchasing Info – Put the description of the item that you want to appear on your purchase orders that you send to suppliers when you place your orders.
- Cost – Enter the cost that you purchase the item for.
- Expense account – QuickBooks will automatically assign inventory items to your Cost of Goods Sold account. A Word of Caution: Do not change this account or it could result in inaccurate quantity/cost calculations.
Setting up a Non-Inventory Item
Select this option if you need to track cost but not quantity for items that you buy and sell.
For example, Paul purchases a variety of odds and ends, such as nails, glue, and solutions to unclog drains. He does not need to keep track of the quantity but does need to keep track of the cost of these items.
The fields that should be completed for a Non-Inventory Item Set Up is shown in the picture below.
Notice that the fields are exactly the same as the info required for setting up an Inventory account with the exception of the Expense account.
Unlike the Inventory item, this expense account is assigned by you and not by QuickBooks.
Setting up a Service Item
Select this option for services that you sell to customers. For example, Plumbing Services, Bookkeeping Services, and Tax Preparation Services would fall under this category.
The fields that should be completed for a Service Item are described below.
- Name – Enter the name of the service that you are billing for (i.e. Plumbing Services)
- Sales Information – This is the description that will appear on customer invoices.
- Sales Price/Rate – Enter the price you bill customers for this service.
- Income Account – Select the account that you want to use to track income for this service.
Step 4 – 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 Run Report as indicated below.
A report similar to the one below should display on your screen. Review it for accuracy.
How Do You Modify a Product or Service on the List?
You can modify a product or service that you previously set up. Click the Edit option next to the product/service 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 (i.e. created an invoice for a customer). This is due to the fact that all transactions are linked to the financial statements. However, if you do have a situation where you no longer need an item that is currently on your product and service list, you can inactivate that item. This simply means that it will no longer appear on the products and services list but it 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.
That wraps up the section on setting up the products and services list. The next lesson in our QuickBooks Online Training Course will be How to Set Up Customers in QuickBooks Online. In this lesson, we will walk you through how to set up contact and payment information for your customers. To access this lesson or any of the others in the series, click here.
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