6 Limitations Of Using QuickBooks Online For Inventory Management

  inventory management

QuickBooks Online is the most popular online accounting software for small and medium businesses. Business owners love it as it is affordable, easy-to-use, well-understood by most accountants and bookkeepers, and is a cloud application, so you can view the data anytime and anywhere from any device with an internet connection.

Apart from using QuickBooks Online for accounting purposes, some businesses also use it to manage their inventory. However, this might not be the smartest choice. One severe limitation of QuickBooks Online is its lack of robust inventory management features. One example of a feature it is lacking is lot tracking, also known as batch tracking, a must-have feature for most wholesale and manufacturing companies. Relying on QuickBooks for your business's inventory management can lead to problems such as incorrect profit and loss statements as well as inaccurate data collection files due to the mishandled management of inventory.

In this blog article, we will examine 6 limitations of using QuickBooks Online for inventory management.  

1. Lack Of Lot Tracking Features

As mentioned in the introduction, QuickBooks Online does not allow your business to do lot tracking for your product within its software. Lot tracking is the process of tracking each unit of inventory across the entire supply chain process, from manufacturing until the point of purchase to your customers.

Most manufacturing or wholesale business, small or large, will need a lot tracking system. In fact, the use of a lot tracking system is a legal requirement in certain industries. For instance, under the Drug Supply Chain Security Act (DSCSA), companies in the pharmaceutical industry are required to use a lot tracking system to identify and track certain prescription drugs when it is distributed in the United States.

Without an automated lot tracking system within your inventory management platform, the alternatives would be to integrate it with a manual or spreadsheet-based lot tracking system. However, this an extremely time-consuming process and prone to human errors. Maintaining an additional system is not only complex and also result in an unnecessarily high cost for your business.

2. Inability To Track Unshipped Orders

Another limitation of QuickBooks Online is that it does not allow you to track your sales order management. If you want to track unshipped orders, your business has to use alternative methods such as an Excel-based spreadsheet solution. However, this method of tracking unshipped orders can take up a lot of time and is prone to errors. Without a proper way to track unshipped orders, this could create confusion within the business on whether orders have been shipped to the customers or if the goods are in the warehouse.

While some businesses have experimented with using the QuickBooks Online’s estimate feature in an attempt to track their open orders, it is not a robust enough solution to manage your business’s supply chain operations.

3. No Multiple Warehousing Option

As your business grows, it is likely that you will need more than one warehouse to stock your inventory. However, QuickBooks Online is only able to support one warehouse location. It is not capable of tracking a large amount of inventory across multiple sites and warehouses.

Companies have attempted to bypass this problem by “splitting” items and assigning them to different locations in QuickBooks. However, it is incredibly complicated to maintain and fails almost all the time. Furthermore, this is not a viable solution especially when your business continues to grow and you need more stock locations to support your growth.

4. Only FIFO Costing Method For Inventory Costing

The only method to track your inventory cost using QuickBooks Online is using the First-In-First-Out (FIFO) costing method. This concept assumes that the first goods purchased or manufactured will be the first goods sold when goods are sold. This determines the inventory value and cost of goods sold (COGS).

However, there are several disadvantages to using this method. It can result in an overstatement of gross margins during high periods of inflation, resulting in misleading financial statements. Inflated gross margins could also result in higher income taxes, increasing your business’s cost of operation.

There are other methods which can be used to calculate the cost of inventory such as average costing, last-in-first-out and the specific identification method. These cost methods might be more suitable for your business depending on your needs and requirement. However, QuickBooks Online is not able to support these inventory costing methods.          

5. Inability To Do Batch Invoicing

For sending invoices to clients, QuickBooks Online does not have the right infrastructure to support your business to carry out batch invoicing and bill multiple clients at the same time. Instead, you would have to invoice each of your customers separately. This would result in a time-consuming process especially if you have lots of customers to manage.

6. Lack Of Industry-Specific Features

Businesses operating in different industries have different needs and requirements when it comes to inventory management. Industry-specific features are meant to help you do tasks unique to your industry quickly.

Intuit’s more robust QuickBooks Desktop product supports these, but QuickBooks Online does not. Industries supported by QuickBooks Desktop include General Contractor, Manufacturing & Wholesale, Nonprofit, Professional Services, and Retail.

For general contractors, for example, users can create ‘Job by Vendor’ reports to organize their job costs by vendor, which allows them to see which vendors still need to be paid. Another example would be the ability to create end-of-year donation statements if you are a company in the Nonprofit sector.

QuickBooks Online does not offer any industry-specific features, and there is no robust support for inventory management for manufacturing or distribution. Its primary purpose is to function as a general accounting software, which explains its lack of emphasis on inventory management related features.

How Else Can I Manage My Inventory If I Still Want To Use QuickBooks Online?

While QuickBooks Online is an excellent online software to help manage your business finances, it is not robust to support your business's inventory operations.

So what are your options if you are still looking to use QuickBooks Online to manage your accounting needs?

The solution: Integrate QuickBooks Online with inventory management software such as Sweet. 

So how does Sweet work with QuickBooks Online?

Sweet work as an inventory-management add-on to QuickBooks Online and acts as a single source of truth for your inventory. Here are some benefits your business can reap from this integration.

  • Automation of your accounting workflow.
  • Advanced inventory management features like lot tracking and multiple warehouse support.
  • Collection of product and order information from B2B customers with our B2B eCommerce portal or B2C customers with integrations to eCommerce platforms like Shopify.

With Sweet’s real-time syncing of information with QuickBooks Online, your accounting and operations departments can work at the same time, creating a more efficient workflow.

If you use QuickBooks Online and want to find out if Sweet is the right fit for you, click here to request a demo.

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