![Should you track Shopify inventory in QuickBooks Online?](http://outsourcebookkeepingindia.com/wp-content/uploads/2020/04/should-you-track-shopify-inventory-in-quickbooks-online.png)
If you’re an online seller, there may be several options when it comes to tracking your inventory. But, should you track your Shopify inventory in QuickBooks Online? The answer is… well… it depends. In this blog post, I’ll go over the basics when it comes to tracking Shopify inventory in QuickBooks Online, and discuss the best options.
Click on the link below to watch my video about whether you should track your Shopify inventory in QuickBooks Online:
The basics on tracking Shopify inventory in QuickBooks Online
Let’s go over some basics that you need to understand to track your Shopify inventory in QuickBooks Online. One thing you have to understand is when you track your inventory in Shopify, you’re only tracking inventory quantities not cost. For accounting and tax purposes, you need to track the inventory quantity and cost so you can reflect a dollar amount in QuickBooks.
One of the most important things you need to understand is that QuickBooks Online inventory is not really made for e-commerce sellers. The functionality we see in QuickBooks Online inventory is for people who sell inventory out of a warehouse and invoice their customers directly.
As a Shopify or e-commerce seller, you’re not invoicing your customers. You’re using Shopify to sell your products online. It requires very different tracking for e-commerce purposes versus what we see in QuickBooks Online. The inventory functionality in QuickBooks Online is also not very robust. If you need to keep a detailed inventory with costs and different levels of inventory, it likely won’t work for you.
The biggest mistake that my Shopify clients make is trying to set up all of the inventory details; the inventory items, quantities, and costs, and end up making an unnecessarily BIG mess.
Now you might be asking yourself “Okay, then. How do I track inventory?” You can track your inventory in a spreadsheet or by using an inventory management app. You’ll need to track quantity and costs to get the dollar amount of your inventory. Take the total amount of your inventory at the end of the month and update the inventory amount in QuickBooks Online using a journal entry. By doing so, you will bypass having to track individual items, costs, and quantities in QuickBooks Online.
The diagram below shows the workflow of tracking Shopify inventory in QuickBooks Online. Take a look at the diagram to understand the big picture, then we’ll dive a little deeper and take a look at each option- using a spreadsheet or an inventory app.
![Workflow for tracking Shopify inventory in QuickBooks Online](http://outsourcebookkeepingindia.com/wp-content/uploads/2020/04/should-you-track-shopify-inventory-in-quickbooks-online.png)
Tracking Shopify inventory with a spreadsheet
First, let’s discuss using a spreadsheet. A spreadsheet is the least expensive way to track your inventory. In fact, you can download my free inventory tracking spreadsheet HERE. It’s the least expensive way (I’m giving it to you for free), but it does take time to update that spreadsheet. You can check out my video on getting your e-commerce inventory ready for tax time, which shows you how to fill out the spreadsheet.
Tracking Shopify inventory with an app
Now let’s talk about using an inventory app to track your inventory. While inventory apps aren’t free, they’re the most streamlined way of tracking and managing your inventory. There are several different options including Ecomdash, Zoho Inventory, Cin7, and Skubana. Look at the different options and make sure the features address your inventory management needs.
Remember that although Shopify says you can manage your inventory in Shopify, you can only manage inventory quantities and not cost. We have to be able to track the inventory dollar amount for accounting and tax purposes.
Closing
I hope my explanation helps you better understand whether you should track your Shopify inventory with QuickBooks Online. I encourage you to join my FaceBook community, 5 Minute Bookkeeping with QuickBooks Online, where you can ask your most pressing questions and interact with other e-commerce sellers, small business owners, and bookkeepers and accounting professionals as well.
If you’re ready to work with an experienced and reliable financial pro on your e-commerce accounting, Feel free to use this link to book a free Discovery call with me. In the discovery call, I’d be happy to talk to you, learn about your specific needs, and see if my team is a good fit to help you elevate your e-commerce business and reach your goals.
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