Inventory clean up becomes a must when the value of the stock you hold in Inventory is not reflected accurately in the respective accounts on the balance sheet. The mismatch is attributable to several reasons. Direct journal entries into the inventory account or inactivating items when there is stock on hand are typical causes for disparity in the numbers. While Quickbooks Inventory clean up is often left to expert consultants or service providers, it is possible for you to attempt the task on your own by following few simple steps outlined here. Do backup all important files before attempting a cleanup!
- Start by reviewing your item list, verifying item types and rebuilding your active QuickBooks file to automatically synchronize data and correct inadvertent errors. This makes sure that latest details are available throughout the system.
- Check if there are any items marked inactive when stock is still available in inventory. Re-activate them and allow them to show up in the Inventory Valuation Summary to check if they help offset the discrepancies.
- Make sure that all transactions are mapped to inventory items/products. Generate a No Item report to check if there are any transactions (Bills, Invoices) without item references, and correct them to include the right inventory item.
- Avoid making direct journal entries to the Inventory Asset Account. With no matching data in Inventory, these entries are bound to surface as discrepancies at a later date. Use the Item tab to record inventory as this takes care of keeping both Inventory and Accounting data in sync by updating all relevant account heads automatically.
- Always adjust inventory using the corresponding function to update the latest inventory quantity, rather than alter inventory account values by posting journal entries.
Mismatch between actual inventory balance and that accounted for, can prove a great pain to correct, when not addressed in a systematic manner. Monthly reconciliations do take the pinch out of inventory cleanups if at all required, especially when dealing with a large number of items or products.
While it is perfectly fine to seek help from service providers to tackle inventory cleanup, remember that service fees tend to vary based on the complexity of the problem and volume of data that needs to be processed. Right classification of item types and systematic inventory recording can vastly minimize the need for Inventory cleanup.