In this lesson, 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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This lesson is one of our 39 Free QuickBooks Tutorials. You can either watch the video below, read through the step-by-step instructions, or do both. The video was made with a slightly older version of QuickBooks Online. While the process of adding products and services is essentially unchanged, the layout of the screens are slightly different. The step-by-step instructions are from the most current version of QuickBooks Online.
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. This is especially important for inventory items where quantity and cost must be tracked.
Setting up your products and services list will allow you to do the following:
- Create invoices quickly that will populate the quantity, description, and price for the product or service on the invoice automatically
- Keep track of your sales by product or service
- Keep track of inventory on-hand so that you never run out
Setting 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, select Sales in the left menu bar and click on Products and Services:
Step 2―Create New Item
From the products and services screen, click the green button in the upper right corner to create a new product or service item:
Step 3―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 for 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 that will help distinguish this item from others.
- 2. Picture of item: You can upload a picture of the item.
- 3. Stock keeping unit (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 a number of 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, then you can designate that Class here, and it will autopopulate on invoices.
- 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; for instance, 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.
?Tip: You’ll need to create a new inventory item before recording the purchase of a new inventory product. To do this, you’ll indicate a quantity on-hand of zero. The as-of date must be prior to the date you will use for the inventory purchase.
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 you use “Inventory Asset” for all your inventory items, which is the default balance sheet inventory account created by QuickBooks Online.?Tip: 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.
- 12. Sales tax category: Specify whether sales of the product are subject to sales tax.
- 13. Purchasing information: Enter a description of the product that should appear on purchasing forms, such as 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 autopopulate 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 and 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 instead of cost of goods sold. For instance, office supplies can be assigned to the office expense account
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:
- 1. Name: Enter the name of the service that you are selling.
- 2. Picture: Attach a picture if you wish.
- 3. 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.
- 4. Class: If your company separates income and expense by classes, designate the class for this service item. Leave the field blank if this service can be assigned to multiple classes.
- 5. Description: Enter a description of the service that you would like to appear on invoices.
- 6. Rate: Input the rate charged 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.
- 7. Income account: Select the income statement account that you want to use to track income for this service.
- 8. Sales tax category: Indicate whether this service is subject to sales tax.
- 9. Purchasing information: Leave this area blank if the services are performed by employees. 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 are often 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:
- 1. Name: Provide a name for your bundle of products and services.
- 2. Description: Provide a description of the bundle to appear on invoices to customers.
- 3. Display components: Check the box if you wish to display the detail of the products and services composing the bundle on invoices to customers.
- 4. Product/Service: Choose the product and service items to include in the bundle. All product and service items must be created prior to assigning them to a bundle.
Step 4―Run Products & 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. Review it 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 a large number of items, it will be much faster to enter the data in an Excel spreadsheet and import the spreadsheet following these instructions.
Step 1―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 like Inventory, Non-inventory, or Service
- Sales price/rate
- Taxable, either Yes or 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:
Step 2―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.
Step 3―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.
Step 4―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 product and services screen.
You now know how to set up product and service items in QuickBooks Online. The next lesson in our QuickBooks Online Training Course is How to Set Up Customers in QuickBooks Online. In that lesson, you will learn how to set up contact and payment information for your customers.