By setting up a product or service in QuickBooks Online you can set defaults for the profit and loss accounts the income and costs will be posted to, and the most common sales tax rates to be applied.
This will save a lot of time when you are recording invoices, allow you to set up reorder points for inventory items, and help ensure that your sales tax returns are accurate.
In this video we edit products and services in the US sample company, including setting up time saving defaults. We also set up a new service that we then flow through to include in an invoice.
If you watch to the end of the video I also show you how this will appear in your financial statements so you can better understand the impact of transactions on your profit and loss and balance sheet, and how filing your sales taxes will be a breeze!
I love to hear from you. Please feel free to comment below, and also, let me know if there is anything else you would like to know about.
Hi, Kerry here from My QuickBookKeeping.
One of the first things you want to do when you set up your QuickBooks Online file is to create the products and services you’ll be selling.
If you’ve not already done so, check out my video on personalizing your chart of accounts. When you’ve done that you’re ready to create the product and services you sell in your business.
Be sure to watch right to the end, if all steps are computed accurately it will also help with the accurate filing of your sales tax returns and ensure you claim all the credits you’re entitled to.
We’re going to use the Quick Books sample company again today, Craig’s Design and Landscaping Services.
To see what products and services they offer select the cog at the top right hand corner and choose products and services under lists.
The services provided are split between design fountains, landscaping, sprinklers and pest control.
Let’s have a look at the first one, design. It’s a service that is sold to customers for seventy five dollars, and posted to the account “design income”. Note that there is no tax selected here, let’s select yes, for taxable, that way will be collecting tax on the design services we sell. That will save you time when you create invoices, you will only have to edit it if the normal code doesn’t apply.
Now let’s look at a product How about pumps. This is an inventory item it has a sku and the current quantity is twenty four. You can enter a reorder point here so you do not run out of whatever it is you sell. Let’s enter 10, then they will receive an alert if you sell another fourteen without reordering.
As we have a physical inventory of pumps, they are also included as an inventory asset that will appear on the balance sheet at cost. Now this is where it gets very interesting, when we sell a pump for fifteen dollars. We will have income under sales of product income for fifteen dollars. We will also record cost of sales at ten dollars and this amount will be reduced from the inventory.
If the term cost of sales is not clear, have a look at my video to understand the income statement, if you still have questions then please send me a message, write a comment or reach out. I’m thinking of writing a blog on terms that need further explanation so would be a great help to know.
So now let’s set up a service for this business. Select new. To keep things simple let’s add a service, how about we add a charge for fountain installation, under the category fountains, and when we sell it the invoice will say “installation of fountain and pump”, then we sell it, the invoice will have this description automatically show up. Now let’s set the price at fifty dollars and yeah, services works. We will also mark this item as taxable yes. Be sure to get proper advice about what to tax to apply to your products and services from your accountant as it will change based on where you live and where you sell to, so now we save and close.
In order to see how this works when we create an invoice let’s select invoices across the top. You can also access invoices from the cross on the right hand corner. Select new invoice and choose a customer, let’s go with Cool Cars shall we. Now next is, fountain, that sounds great. And a pump, and installation, the one that we just set up. Now let’s select to tax rate, your options will depend upon the regions and code you set up in your file so let’s assume Dylan is in California
Do we have a California rate here. Yes we do. Let’s change the date to next month so I can run some reports and show you how this impacts your financial statements. Let’s save this invoice.
On the left hand tab. select reports. Choose profit and loss. Let’s use custom dating so that we can choose the month that we’ve put our transactions in. Run the report. Now we have sales of product income, two hundred ninety dollars that’s clickthrough. Yes look it’s for a fountain and pump. The service is a fifty dollars for the installation also we can see cost of sales for the fountain and the pump was one hundred thirty five dollars.
By setting up the products and services when we completed our invoice it was easy to select the items and our reporting was then accurately updated. Let’s see how many pumps we have now. Twenty three. This works.
Now without confusing matters too much, let’s look at the taxes. Select the sales tax liability report and let’s limit the dates once again to September. Here is the tax we collected for California, if we drill down we can look at the invoice. The tax has been recorded and when we complete our sales tax return everything is up to date.
By setting up your products and services accurately at the beginning your profit loss and balance sheet will be correct and filing a sales tax return will be a breeze.
Now let’s have a quick look at a report you can run to show sales broken down by product, select reports again on the left hand margin. And on to all reports So let’s review sales. Then sales by product and service summary. Once again we’ll change the dates to include the invoice we created, run the report. From the report you can see the breakdown of the items we have sold, what they cost what our profit was on those items, it’s a very useful report, I would suggest saving it, save the customization and whenever you select what it will show up as a custom report.
We’ve certainly covered a lot, please don’t hesitate to reach out if you have any questions, or would like help getting this set up, if this video has been useful, please hit like below and subscribe to my channel for more Quick Books tips on how to’s.
Also, I’ve created a small business month end checklist so you can be sure your records are up to date each month, and you can make the best decisions for your business. Click the link below to download a free copy.
If there’s another topic you’d like help with please make a note in the comment box, my next video could be for you. Cheers