Track Shopify Inventory: QuickBooks vs. Alternative Methods

Table of Contents

1. Introduction
2. Should You Track Your Shopify Inventory in QuickBooks Online?
3. Understanding QuickBooks Online Inventory for E-commerce Sellers
4. Tracking Inventory for E-commerce Sellers
5. Using Spreadsheets to Track Inventory
6. Using Inventory Apps to Track Inventory
7. Comparing Inventory App Options
8. The Importance of Tracking Inventory Costs
9. How to Reflect Inventory Balance in QuickBooks Online
10. Conclusion

Should You Track Your Shopify Inventory in QuickBooks Online?

When it comes to tracking your Shopify inventory in QuickBooks Online, the answer is, "it depends." While Shopify allows you to track inventory quantities, it does not provide a way to track inventory costs, which is important for accounting and tax purposes. In this article, we will explore the basics of tracking Shopify inventory in QuickBooks Online and discuss alternative methods for accurately reflecting inventory in your financial records.

1. Introduction

Inventory management is a critical aspect for e-commerce sellers, including those using Shopify. However, when it comes to integrating inventory data into your accounting system, things can get a bit tricky. This article aims to provide guidance on whether you should track your Shopify inventory in QuickBooks Online and offers alternative methods to accurately reflect inventory in your financial records.

2. Should You Track Your Shopify Inventory in QuickBooks Online?

The first question to address is whether it's necessary or beneficial to track your Shopify inventory in QuickBooks Online. While Shopify's inventory tracking feature allows you to track quantities, it does not capture costs, which are essential for accounting and tax purposes. To accurately reflect your inventory's value, you need to track both quantities and costs.

Tracking inventory in QuickBooks Online has its limitations, especially for e-commerce sellers. The inventory functionality in QuickBooks Online is designed for businesses that have warehouses and invoice customers directly. However, as a Shopify seller, you do not send invoices directly. Instead, you rely on Shopify to sell your products online, making inventory tracking in QuickBooks Online less suitable for e-commerce purposes.

3. Understanding QuickBooks Online Inventory for E-commerce Sellers

To make an informed decision about tracking Shopify inventory in QuickBooks Online, it's crucial to understand the inventory functionality in QuickBooks Online and its limitations for e-commerce sellers. QuickBooks Online's inventory features are not robust enough to accommodate the complex needs of e-commerce sellers. Trying to set up all inventory details, including items, quantities, and costs, can lead to confusion and unnecessary work.

4. Tracking Inventory for E-commerce Sellers

Since QuickBooks Online may not be the ideal solution for tracking Shopify inventory, it's important to consider alternative methods. Two popular options are using spreadsheets or inventory management apps. Both methods allow you to track quantities and costs effectively, providing a dollar amount for your inventory. By utilizing these alternative methods, you bypass the limited inventory functionality in QuickBooks Online.

5. Using Spreadsheets to Track Inventory

Using spreadsheets is the most cost-effective way to track your Shopify inventory. You can download an inventory tracking spreadsheet, which will be linked in the description box below this article. While it is free, it does require time and effort to update regularly. However, there is a video available that demonstrates how to fill out the spreadsheet to prepare your e-commerce inventory for tax time.

6. Using Inventory Apps to Track Inventory

For a more streamlined approach to inventory tracking, using inventory management apps is the preferred method. Although there is a cost associated with these apps, they offer comprehensive features specifically designed for managing inventory. Options to consider include Ecomdash, Zoho Inventory, Cin7, and Skubana. Choosing the right app depends on the specific needs of your business, so be sure to evaluate each app's features thoroughly.

7. Comparing Inventory App Options

When selecting an inventory app, it's essential to evaluate the available options and their suitability for your business. Look for features that address your inventory management needs effectively. While Shopify claims to have inventory management capabilities, it only allows you to track quantities, not costs. Remember that tracking inventory costs is necessary to determine the overall value of your inventory for accounting and tax purposes.

8. The Importance of Tracking Inventory Costs

Accurate inventory costing plays a crucial role in financial reporting and tax calculations. By tracking inventory costs, you can determine the value of your inventory and report it properly. This information is necessary for calculating your cost of goods sold (COGS) and determining your business's profitability. Ignoring inventory costs may lead to inaccurate financial statements and tax filings.

9. How to Reflect Inventory Balance in QuickBooks Online

To correctly reflect your inventory balance in QuickBooks Online, you can use a journal entry. Creating a journal entry is a type of transaction that allows you to adjust account balances. A future video will provide detailed instructions on how to create a journal entry in QuickBooks Online to accurately represent your inventory balance.

10. Conclusion

Tracking Shopify inventory in QuickBooks Online can be challenging for e-commerce sellers due to the limitations of the software's inventory functionality. However, alternate methods such as using spreadsheets or inventory management apps can provide accurate tracking of inventory quantities and costs. By properly reflecting your inventory balance in QuickBooks Online, you ensure that your financial records align with your business's inventory worth. Stay tuned for future content that explores additional aspects of e-commerce accounting and helpful tips to streamline your financial systems.

Highlights

• Tracking Shopify inventory in QuickBooks Online depends on the need to capture both quantities and costs for accurate accounting and tax purposes.
• QuickBooks Online's inventory functionality is designed for businesses with warehouses and direct customer invoicing, making it less suitable for e-commerce sellers.
• Alternative methods like using spreadsheets or inventory management apps provide more comprehensive tracking options for e-commerce sellers.
• Spreadsheets are a cost-effective way to track inventory, while inventory management apps offer a more streamlined and feature-rich experience.
• Tracking inventory costs is essential for accurate financial reporting and tax calculations.
• Reflecting inventory balances in QuickBooks Online can be achieved through journal entries, which will be covered in a future video.