Create and manage inventory items

Inventory items are used to identify, count, and manage physical goods or materials held by a business for sale or production. They are used when entering line items in many transaction forms in Manager. Beyond being the foundation of quantity monitoring, they:

  • Standardize terminology by always referring to a product with identical language
  • Improve accounting accuracy by always posting similar income or expense items to the same accounts
  • Store and apply consistent prices to frequently sold or purchased goods
  • Speed up entries by automatically filling information on forms

Note
Inventory items are used for sale, purchase, and management of physical goods, because they support counting quantities on hand, monitoring stock movement, and calculating profitability. For commonly sold or purchased goods or services that are not managed in this way, use non-inventory items.

Enabling the Inventory Items tab

To use any inventory-related function in Manager, enable the Inventory Items tab. At the bottom of the left navigation pane, click Customize, check the box for Inventory Items, and click Update below the list:

Basic steps for creating inventory items

In the Inventory Items tab, click the New Inventory Item button:

Complete the definition:

  • Item code can be anything that helps find, sort, or categorize the item. This could be a stock-keeping unit (SKU) code, a model number, or a simple memory aid. It must be unique and should be short. Codes will appear on forms if they are used. Serial numbers are not acceptable item codes, because every unit of inventory would be treated as a separate product.
  • Item name should be a relatively brief, informative name for the inventory item. It will appear when searching for an inventory item to complete a line item. It will also appear on various management reports. If no further description of the item is entered, Item name will appear in the Description field on completed forms, such as sales invoices.
  • Unit Name is optional, but can be used to specify units by which the item will be sold, purchased, and counted. Only one unit name is allowed; if materials are purchased and sold in different units, either apply conversions before making entries or create separate inventory items and use production orders or inventory kits to handle the differences.
  • Purchase price is the price at which the item is usually purchased. This can remain blank if prices vary from purchase to purchase. If a purchase price is entered, it will be automatically populated into purchase-related forms, but can be edited.
  • Sales price is the price at which the item will be sold. Leave blank if the sales price frequently changes. If a sales price is entered, it will appear automatically on sales-related forms, but can also be edited.
  • The Description field is for more comprehensive information. Its contents, if present, will appear on finished forms in place of Item name, so it should also adequately identify the item, not simply add detail. Anything a customer or supplier should see can be placed into this field.
  • Production stage appears only when the Production Orders tab is enabled and the first production order has been entered. The default entry is 1. Higher integer numbers can be entered when a finished item requires other items to be produced or purchased first.

Notes
Production stages ensure final inventory item costs added to Inventory on hand properly include the current average costs of all input inventory items by executing production orders in the correct sequence. They also help prevent confusing automatic entries when production orders drawing on the same inventory item are entered on the same day.

More details about production stages is found in another Guide.

Click Create to save the inventory item (or continue by adding additional detail as described below). The inventory item will be visible in the Inventory Items tab:

Adding detail to inventory items

Additional options are available by making selections in dropdown lists or checking boxes. Relevant information defined this way will be prefilled when the inventory item is added to a transaction:

  • If at least one Tax Code has been created under Settings, the one usually applicable to the inventory item may be selected in a dropdown box. This choice can be edited on forms.
  • If at least one Tracking Code has been created under Settings, one usually applicable to the inventory item may be selected. This choice can also be edited on forms.
  • The Starting balance can be specified if a start date has been set. Starting balances can be set for every inventory location that has been defined.

Several accounts are activated automatically when the Inventory Items tab is enabled and the first inventory item is created. By default, inventory transactions will post to these:

  • Inventory on hand, an asset account
  • Inventory - sales, an income account
  • Inventory - cost, an expense account

For many businesses, these are sufficient. But for businesses wishing to further divide inventory accounts, two checkboxes indicate whether sales prices or costs of the inventory item should be posted to custom accounts created by the user. When these are checked, fields appear for non-standard account designation. Such custom accounts must be created first in the chart of accounts:

A custom income account is where sales prices will be posted when an inventory item is sold, either through a sales invoice or receipt. A custom expense account is where the current average cost of an item will be posted when it is sold, transferring its cost from the Inventory on hand asset account.

Using inventory items

Inventory items can be used for:

  • Receipts and payments
  • Expense claims
  • Sales and purchase quotes
  • Sales and purchase orders
  • Sales and purchase invoices
  • Credit and debit notes
  • Delivery notes
  • Goods receipts
  • Inventory transfers and write-offs
  • Production orders
  • Journal entries

When completing most of these forms, an Item field will appear at the left end of line items whenever any applicable inventory or non-inventory items have been defined. To use an inventory item, click on the dropdown box of the Item field. Or, begin typing the Item Code or Item Name in the field to take advantage of the autosearch capability. When an inventory item has been selected, all its parameters will automatically be filled for the line. Either cost price or sales price will be used, depending on the type of form. Anything can be edited except specified accounts:

Updating inventory items

Inventory items can be updated when required, such as when a price change occurs. In the Inventory Items tab, click Edit for the item to be changed:

Edit the item as desired and click Update. Existing forms using the inventory item will not be modified. Only future forms will be affected.

If the inventory item is no longer needed, it can be deleted as long as it has never been used. But Manager will not allow inventory items to be deleted if they have been used. In that case, check the box, and the inventory item will no longer be available.

If an inactive inventory item becomes useful again, scroll to the bottom of the inventory item list, where you will see the item’s name in light grey text. Click Edit next to the item’s name:

Uncheck the box and the item will once again be available. Remember to click Update when finished editing.

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