 QuickBooks Online 2023 E-commerce and QuickBooks Flow Chart Get ready to earn the skills needed to boost your bank books on up with QuickBooks Online 2023 Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page we also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it here we are in our QuickBooks Online test company file remember in the primary two ways you can practice with QuickBooks Online possibly for free is number one the free 30-day trial often offered by Intuit Intuit being the owner of QuickBooks which you can currently find on the Intuit website intuit.com then search for the QuickBooks software I would normally then go all the way to the bottom of the page because although this sales page will change over time they have had this footer quite static and constant over the years where you can then select the product of QuickBooks Online this sales page being a bit more static over the years than the prior one and has had for a long time this free 30-day trial that you can toggle on the other option you have going back to our test company file is to use the QuickBooks Online sample company file and you can open the sample company file while having your current company file open if you use another browser or we suggest using the incognito window so now we've opened the sample company file with the incognito window we have the two company files open at the same time if you're using Google Chrome you can open an incognito window by selecting the three dots in the browser new incognito window then search for QuickBooks Online test drive select the option that has intuit.com because Intuit is the owner of QuickBooks in the URL okay so now we want to think about the flow chart for QuickBooks and the normal process for an inventory related company so that we can then deviate it or change it for the specific needs and we're dealing with a company that has e-commerce and another platform such as I've got like a Shopify store over here so we have a Shopify platform where the actual sales are taking place we're tracking some of the products possibly in another platform and that's going to make it a little bit different than the norm of tracking inventory within QuickBooks if we didn't have a whole separate kind of Shopify platform so let's jump on over to a flow chart over here this flow chart is actually from the QuickBooks desktop version but we're just looking at it to look at the flow of the inventory and sales as it goes to the cycle and the forms and the names of the forms will be much the same in QuickBooks Online when thinking about a business that buys, marks up and then sells inventory making a profit from that profit margin we can follow the flow of the inventory from the purchase of the inventory represented in our flow chart here in the vendors or purchases cycle to the point where that inventory is sold represented in our flow chart in the customers cycle which you can think of as the sales or the revenue cycle we're first going to consider that as if we're basically an on-ground type of store because QuickBooks is basically designed for that type of setup and then we want to think about what kind of modifications need to happen within the process when we actually have a virtual type of store and a lot of the logistics are being handled not in an on-ground type of situation but by a third party that we're going to be integrating in so how can we pull that information into something from like a Shopify or an Amazon in order to construct our financial statements when thinking about an on-ground store that sells inventory following the flow of inventory the first step of course is the purchase of the inventory which may but does not always start with a purchase order the purchase order being a little bit unusual of a form because it doesn't have an actual financial transaction related to it and it seems a little bit backwards in process when we compare it to like our purchase personally of online stuff for example like if I was to purchase something from Amazon personally I have to pay for it when I request it and then they ship it to me the purchase order is basically reversed where we have the power to be able to say hey I would like you vendor to ship me the goods that I'm requesting with the purchase order and then I'll pay you after I receive it so it kind of depends if you have the capacity to request the inventory to be shipped before paying it if you're using the purchase order then we can imagine the next step we've received the inventory in our store or our warehouse or whatever with a bill in it and if the inventory count matches the purchase order we're going to enter the bill into the system which will actually record the inventory at that time and then we'll pay for the inventory when comparing this to an e-commerce type of situation we might have a similar process for the purchase of the inventory but we also might have a third party platform helping us out with the logistics of purchasing the inventory and we may or may not be dealing with the actual physical handling of the inventory so for example if I look at a Shopify type of store and I was to list my products the main goal of the Shopify seller is generally to logistically be able to have the number of units of inventory that they can be tracking so that they don't have too much inventory so that it spoils or it becomes useless over time and so that they have enough inventory so that they can fulfill the needs for requests of that inventory that's kind of where the focus will be however on the bookkeeping side of things we also need to think about not just the units of inventory but also the cost of the inventory so we can properly record in dollars in dollar amount, not unit amount the amount on the financial statement for inventory and cost of goods sold and because inventory prices kind of change over time we also usually need to use some kind of flow assumption like a first in first out or last in first out so that's some of the issues we'll kind of dive into in future presentations there's kind of easy ways to do that and there's going to be more complex details raised to do that and there's pros and cons of the different kind of ways we can be tracking our inventory if we were tracking inventory within QuickBooks in an on-ground type of system usually we would be setting up actually inventory items in the QuickBooks system so again in a Shopify store you're typically looking at the inventory units that you're going to be putting into Shopify and then you have this issue or question of should you be pulling those inventory items into QuickBooks the way you might be doing inventory if you were working in an on-ground type of system many people would generally argue that maybe that would be redundant maybe that's not the best thing to do because QuickBooks Online isn't really designed to be tracking inventory when you're looking at an e-commerce type of situation it's a little bit redundant to track the inventory in both spaces and you can also overwhelm your QuickBooks file if you have a lot of sales by just pulling in all that data into QuickBooks when you may already have it somewhere else so we'll dive into how can we pull that information then in if you were selling it in an on-ground type of situation then we would be and you were tracking inventory in a perpetual inventory system then we would be adding the products and services as we buy them into our products and services tab here okay so let's go back on over to our flowchart and so then once we have the inventory on the books the next thing that happens is we sell the inventory now the sales forms in QuickBooks are going to be an invoice and a sales receipt so and before I get into that in more detail let me just if we boil down the purchase of inventory to what happens on the bank account at some point in time of course we're paying for the inventory we're going to see the cash go out of the bank account with a check form which you could call like an expense type of form and if you have the bank feeds on we'll talk about integrating the bank feeds we'll see it the money go out of the checking account and then the question is how are we going to record basically the money going out of the checking account if we were doing a full service tracking inventory system within QuickBooks we would need to be tying it out to the items so we can run inventory reports if we're not doing a full service system within QuickBooks which is typically the case when you're using a Shopify store we're going to have to track inventory someplace else partially in the third-party platform because we'll have the units of inventory that we can try to make sure to populate here but we're usually going to need something else like a spreadsheet or possibly a third-party app depending on how complex you want to get alright then when we sell the inventory if it was an on-ground store and we're using a perpetual inventory system we would use an invoice and or a sales receipt so if it's actually in a store and someone bought it in the store we would use a sales receipt so we don't have to track the accounts receivable and the invoice is used when we're going to have to deal with accounts receivable to track them to pay us later so let's just think about a sales receipt situation because that's similar to an e-commerce situation because when someone buys something on a website they're typically going to pay for it at that point in time which is similar to someone purchasing something like in a store and bringing whatever they're purchasing up to basically the cash register now when you think about a sales receipt the transaction that happens in a sales receipt is quite complex actually even though if it's set up properly it's easy to facilitate you might have gone to a grocery store that has a self-checkout you can do it yourself you just scan the thing but the actual transaction that's happening is it's recording an increase in whatever you're paying them in cash that's going up possibly into some holding accounts so they can group the payments and then put it into the bank account the other side is going to revenue or sales and then you also have to deal with a decrease of inventory at that point in time and you have to deal with the related cost of goods sold and possibly with sales tax all happens at this point if you're using a perpetual inventory system so that means that if I was in QuickBooks in order to do that I would have to have my items to be set up properly and then and then when I make a sale I would use either an invoice or a sales receipt and the items as I enter the items into the system and we'll show a demonstration of this in future presentations it would properly do everything we just said it would reduce the inventory account in dollar amount and as well as the subsidiary reports and unit record the proper cost of goods sold related to that and record the sales related to that and deal with the sales tax now obviously we can't do that in a Shopify situation because we're not usually going to make a sale with a sales receipt form in a Shopify situation what's going to happen is Shopify or Amazon or whatever we're using is going to be facilitating the sales transaction so what we're going to see on our side then in QuickBooks is eventually the sale is going to hit the bank account so what happens is I'm going to make the sales here and usually each sale may not hit the bank account at each sale so if I sell $5 products then it's not like my bank's going to be hit by $5 $5 $5 each time often times there's going to be some kind of batching that takes place so if I was in an around store for example I'm at a cash register I would basically make whatever sales I do for the day if they were cash sales I would group that cash together and go to the bank and then deposit a lump sum for the cash sales that happens so what's going to happen on my bank account is I'm going to have a lump sum amount that's going to be hitting the bank account so that means that when I categorize the bank account on my books I want to categorize it in the same grouping that's going to be showing on the bank statement which adds kind of another bit of a logistical type of problem so when we think about an e-commerce situation we're not going to have a sales receipt what we do have are the bank feeds we're going to see the thing hit the bank so that's one thing that we can deal with now when we see the thing when we see the deposit hit the bank in the Shopify store as we saw in the past one of the problems is that we're not going to see some of the expenses and stuff related to it so what we would like to do possibly is use other integration apps if we want to get more advanced so that we can break out and see more of the detail that's going to go into our system so usually the question is well how am I going to deal with this inventory flow within QuickBooks facilitating some of these transactions in a third party platform well one way you can try to do it is you can say I'm going to integrate everything from Shopify every sale that happens in Shopify every time I make a sale of a product I want it to pull in to our system over here as a check form or bill form every time I buy inventory and then every time I sell inventory I want to create a sales receipt that will then tie out to product items that I have set up in QuickBooks which will basically mirror exactly what we would be doing in an on-ground type of situation now there's a problem with that method and that is that it's quite complicated number one because now you've got to set up all your items in here and in Shopify make sure that they tie out and then make sure that the integration is working properly it's redundant possibly because you already have a lot of the data in like a Shopify or Amazon in terms of the inventory count so to do it again in QuickBooks may not be necessary in free often times when you're making sales on like a Shopify or an Amazon you're looking for volume you're looking to sell a whole lot of products and you might not need to track in-depth each customer other than to get them on your mailing list or something like that in QuickBooks you might not need to pull all that stuff into QuickBooks and if you do then it could overload it could weigh down your QuickBooks file over time and that wouldn't be a good thing to do so usually the recommendation especially for smaller businesses is not to do that because hopefully you're going to grow and you don't want to overwhelm the system or make things too complicated so the next way we can do that is we can say well let's think about the points where the bank account is going to be impacted especially on the purchasing side I can see of course when I purchase inventory I'm going to see the transaction hit the bank and instead of using a perpetual inventory system we'll use more of a periodic inventory system so that's how we'll deal with that side of things and on the sales side of things we can wait till it hits the bank and do the same thing record the revenue when it hits the bank however we're also going we might want a little bit more detail than that on the revenue side so we could use integrations and apps to kind of give us more detail on the fees and whatnot so that's kind of why the inventory system in QuickBooks is not really designed exactly for the e-commerce system however you can't integrate it fairly nicely into an e-commerce system because the real issue is that the other platform is doing part of the work so now you got to pull in what you need into the QuickBooks system and we're going to modify it so that it fits our needs and our needs of course will change on the different businesses we have and how large we are and how much detail we want and so we'll talk about some of those issues in future presentations