How Do I Enter Purchase Orders In QuickBooks Online? And Some Important Reasons You Should Be!

person holding calculator in front of laptop

QuickBooks Online is a great tool for small & medium-size businesses as well as start-ups who are looking to keep accurate records of their company’s financial transactions. Since it is a cloud-based tool, you can easily access it right from your Internet browser without needing to download any special software to your device. That means you can use it anywhere, whenever you need it. 

If you’re a business owner or employee that’s handling some of the administrative functions in this role and have been asked to add the purchase orders in QuickBooks, here’s everything you need to know to get the job done right. 

Why Tracking Purchase Orders is Important

As an ecommerce business, it is important to keep accurate track of products and services you have ordered – but not yet received from a vendor. If you are not using the purchase orders function, you might instead create a bill. This is not the best approach as it can create inventory discrepancies. You may run into angry customers who are now waiting on orders they believed were in stock and shipping soon, as your system added those products to “available” stock at the time of bill receipt.

The great thing about entering and tracking purchase orders in QuickBooks Online is that when you enter the PO it does not post to available inventory. Additionally, at time of product receipt, you can simply receive the inventory into your system making it available for sale directly from the original PO. There is no duplication of work! 

Another benefit of using Purchase Orders in your accounting functions is that it helps prepare your team for incoming products. Your warehouse can prepare space and compare your PO to the actual items received. Your sales and marketing team can prepare campaigns, inform customers, and even take pre-orders. Your accounting and financial team can update projections, run cash flows, and track efficiencies. Without insight of inbound products, and their associated costs, your team is in the dark. With purchase orders you can be more proactive, allow them to prepare in advance and benefit from increased sales, inventory turnover, and profits.

Let’s get started.

First, insure you have the correct QuickBooks Online Subscription (Plus or Above) and enable the PO functionality:

  1. Click the gear icon (top right corner of the home page)
  2. Click Account and Settings (under Your Company)
  3. Click the Expenses tab
  4. Find Purchases orders and click on the pencil icon (edit button, right side of the screen)
  5. Click the toggle button to turn on Purchase Orders
  6. Click Save

How to Enter Purchase Orders in QuickBooks Online

  1. Click + New (top left corner of the home page)  
  2. Click Purchase Orders (under Vendors)
  3. Complete Form Fields
  4. Click Save 

Note: For accurate inventory numbers, be sure to use the same items/skus on POs that you use on your Estimates and Invoices. Too often we see new entrepreneurs or QuickBooks users Purchasing XYZ widget, then selling the same widget as ZYX. As you buy and sell this identical product under two different skus, your books will show a positive inventory on XYZ and a negative inventory on ZYX. 

Another common problem is in quantity receipt vs. quantity sold. For example, you might order 100 bulk stickers in a package. At time of receipt, you might be tempted to match your vendors invoice “Sticker Package, Qty 1 at $50.” If you turn around and sell those same stickers individually for $1 as “Sticker, Qty 1 at $1”, you will have some frustrating inventory issues.

Any guess why? 

First, the items/skus do not match. However, even if they did match, we have incorrectly received quantity 1 into stock while we are going to eventually sell 100 units. Not only is your inventory count off, but your cost of goods sold (COGS) is grossly overstated. You will begin to wonder why your gross profit ((GP) (sales – cogs)) is a negative $49 on a $0.50 sticker you sold for $1.00!

If your business is making a significant number of purchases and you want to ensure you are keeping efficient and effective books, then purchase orders are the way to go! Have questions? Need help with your accounting? Trust the experts at DOAAR to help alleviate the stress and frustration of handling your businesses accounting.