Using Inventory Assemblies with QuickBooks Online

Are you a small or medium manufacturing business and need a way to manage raw materials and finished goods while on a budget? You’re not alone. You probably use QuickBooks Online to manage your inventory currently, but you realize that it doesn’t support manufacturing modules like bill of materials (BOM) or inventory assemblies. What do you do?

Okay, first of all, here’s the good news: you don’t have to deactivate your QuickBooks Online yet.

QuickBooks Online is Intuit’s cloud-based accounting platform. Launched in 2001, QuickBooks Online provided a great alternative to Intuit’s desktop-based suite of accounting-based products, i.e., QuickBooks Pro, Premier and Enterprise products. QuickBooks Online features a mobile app, so you can keep your books accurate and up-to-date while on the go. Its primary features are invoicing, cash flow, and expense tracking.

 Despite the advances of being cloud-based and featuring a mobile app, QuickBooks Online may not be perfect for all businesses. One feature sorely lacking is the lack of a production or bill of materials (BOM) module. But what makes these manufacturing modules so crucial to your business? Let’s dive deeper to understand how managing assemblies and BOM properly could lead to your success:

Inventory Assemblies and Bill of Materials (BOM)

Inventory assemblies are essentially items composed of other items. It is the product you’re manufacturing. Let's use a bicycle as an example. The assembly line is composed of several parts: the bike frame, wheels, a handlebar, pedals, brakes, and even the stickers. In a warehouse, these parts are all trackable and located on different shelves. This is your inventory.

Inventory assembly allows you to combine all the physical parts and their assembly costs into a new trackable item—a bicycle. This is the finished product.

Before production starts, all components required to make the bicycle should be accounted for inside the production area so that they are ready to be carried out for the build. Each part goes through various processes until the bike is completed. To mass-produce the bike, you only need to repeat this process.

Inventory assemblies contain a bill of materials (BOM) which is essentially a list of components that you use to build the item. The BOM can include other inventory assembly items, inventory parts, non-inventory parts, service, and other charge items.  

In manufacturing, a BOM is a list of documents that are critical components when building a shippable product. It includes a detailed description of each stage of the assembly process making it easier to stay true to your standard process and get to a finished product that’s as close to the original design as possible—if not identical.

A BOM pulls together all sorts of product information—design, engineering, document control, operations, manufacturing, purchasing, and contract manufacturing—and keeps it accurate and clean so you have a firmer grasp on each detail of the parts required to build your product.

Inaccuracies in your BOM could lead to problems in your production. Issues, like ordering the wrong parts or in incorrect amounts, is common to businesses without proper BOM. Be it a screw, a bolt, or a pin—everything must be accounted for. Otherwise, you can expect some delays in your production if ever you lose one. Issues like these could lead to an avalanche of problems which would eventually result in losses.

As mentioned earlier, mastering the management of these manufacturing processes can eventually lead to your success. Here’s how you can maximize them to your advantage using the industry's best practices according to Chron.

  1. Automated Systems

Manufacturing and production require accuracy and efficiency to turn a profit. While manual tracking has its benefits, it’s susceptible to errors and inaccuracies that could lead to waste, quality issues, and losses which can impact your business negatively.

When you entrust your inventory assembly to an automated system, you can centrally locate parts, supplies, and tools needed to complete a product. This ensures that your supplies are enough throughout the manufacturing process, preventing delays in production.

  1. ERP Software

There are a lot of things that could go wrong in your production area. If you don’t monitor each component, the biggest concern in production is quality control. This sounds more complicated than it really is, so thankfully, there are tools to help you manage.

An enterprise resource planning software or ERP can help you monitor, store, and interpret data from multiple business activities all in one platform. It gives you a holistic view of the business by streamlining supply chain management, integrate with accounts payable, and ease the processes of an entire manufacturing organization.

  1. Networked Staff

It’s best practice manufacturers to adequately equip their personnel with training since they are just as important as systems and components on the assembly line. This support enables proper and consistent execution of inventory tracking duties.

Company-provided tools and networking devices like mobile phones and tablets allow employees the means to connect with your ERP, which translates to more eyes looking out for your business. Fewer errors, more productivity.

  1. Workflow Management

Workflow management is assigning the right personnel to specific duties and designating exact processes that need to be strictly followed from the moment raw materials are received to when the finished product is shipped.

Having a clear and stable workflow makes your process as seamless as a well-oiled machine.

Great inventory management software should support your manufacturing business so that it can accomplish the best practices that we covered. And while QuickBooks Online lacks support modules like assemblies and BOM, it does have a feature to update inventory levels to mimic the changes for an assembly item.

QuickBooks Online also has bundles, a collection of products and services that are grouped and sold together. This feature can be used when you don't need to transfer and track the finished products before they are sold. Bundles are an excellent alternative for assemblies.

If you already own a QuickBooks Online account, there are third-party applications within QuickBooks that allow you to create assembly and group item transactions through the apps menu. All you need to do is type in a related keyword in the search option to locate the specific app you’re looking for. Note that while these apps are worth checking out, they do come at an extra price. Finally, the option of getting the enterprise version is also open to you—though we do recommend that you should identify and consider if it's the right fit for your business.

Here at Sweet, we have partnered with Intuit and created robust integrations with QuickBooks Online and Intuit’s other desktop-based accounting products, so that you can use them with our highly rated B2B eCommerce portal and inventory software. To find out how we can help your business with implementing QuickBooks, start your free trial today.