If you use the Inventory feature of QuickBooks you understand the concept of quantity on hand – a measure of the quantity of any inventory part or inventory assembly item that you have at any given time. QuickBooks also has another measure of quantity that many people don’t understand – available quantity. Let’s dig in to this feature to see how it works.
Quantity on hand is the quantity of a particular item you have in your possession at a given point of time. If you receive an item, this goes up. If you sell an item or use that item in an assembly build, it goes down. You can adjust it with the Adjust Quantity/Value On Hand function. Keep in mind that this value is “date sensitive” – any time you see a report or transaction that involves a date then the quantity on hand shown is the value calculated as of that date.
If you are selling inventory parts (or assemblies) this value can be misleading. It doesn’t take into account other “promises” or allocations that you have made for this item. You may, for example, have a sales order that is promising a quantity of this item to a customer, or a pending build assembly transaction that should consume the item. So if I’m talking to a customer and entering an invoice or sales order it is easy for me to overcommit, to sell items that I don’t really have available because of other commitments that I’ve made. That is a problem.
Higher level accounting/inventory systems often have a concept of “available to promise” – a quantity that represents not only the quantity you have on hand but also involves allocations (promises) made to sales orders in progress or future builds of assemblies, as well as incoming purchase orders. This is a very useful tool.
In QuickBooks we have an optional feature that is called the quantity available, which is similar to the “available to promise” concept.
There are several Items & Inventory preferences that affect how this works.
To enable this feature you should check the two boxes under “When calculating Quantity Available…”.
The next choice is optional. If you check the “Warn if not enough inventory to sell” box then any time that you enter a quantity in a sales transaction for an amount that exceeds the chosen value, you will get a popup warning. I generally recommend having the box checked, because you don’t really want to be selling things that you don’t have (and having “negative inventory” is generally a very bad thing to do in QuickBooks). If you check this box then you have an additional option over which value to work with. I recommend selecting “Quantity Available” in most cases.
Note that this feature has no effect on inventory valuation or your financial statements. All this is doing is adding warnings in the sales transactions and providing you with additional information in some windows and reports. You can easily turn this on or off as you wish with no bad side effects.
Current Availability Window
When this feature is enabled QuickBooks will provide you with a window that lets you see details about the available quantity. This can be reached from several locations:
- In the item list, select the item, then either click the Activities button at the bottom of the list or right click on the item to get a menu, and select Current Availability.
- In a purchase order, invoice, sales order, sales receipt or estimate, select an item for the order. If the item is an inventory part or inventory assembly then you will see a small graph symbol in the quantity column. Clicking on this will open the window.
The Current Availability window shows you a summary of the information about this item and the status of the quantity that is available. The item that is shown here is an inventory part that has been used in sales orders and purchase orders, as well as being a component in an inventory assembly.
As you can see, we have 8 of this item “on hand”, but 12 of them are allocated to other transactions that are in process. A net “quantity available” of –4 says that you shouldn’t be telling your customer that you can sell them the item, even though there may be 8 on hand. Or at least you should be saying that delivery might be delayed.
However, you can also see that there are 6 of these coming in on purchase orders. Maybe we CAN promise the product to the customer? If you click the Show Details button at the bottom of the screen and select purchase orders from the dropdown list, you can see a list of the open purchase orders for this item.
This shows you when the items will be received, which gives you some idea of when you might be able to fulfill the order. You can double click on the individual orders in this list to look at the purchase order details.
Quantity Available in Reports
One of my favorite inventory management reports in QuickBooks is the Inventory Stock Status by Item report. If you enable the available inventory feature there are three columns added to the report; “On Sales Order”, “For Assemblies” and “Available”.
Let’s look at the “Lens” item that we investigated earlier. You see that there are 8 “on hand”. There are 10 “on sales order”, which represents the quantity of this item that you’ve already promised to someone on open sales orders. There are two of this item promised (allocated) to pending builds of an inventory assembly item that uses this item as shown in the “for assemblies” column. That works out to be an “available” amount of –4. The total quantity on purchase orders is shown in the “on PO” column along with the “next delivery” date (based on the expected due date of the purchase order).
A word of caution, however. Keep in mind that most reports in QuickBooks have a date range associated with them. Most information windows or lists do not have a date associated. If I open the inventory stock status by item report it usually defaults to the current date, and in this case you’ll notice that the report differs from what I see in the current availability window (which was set to “all” dates).
Several of my sales orders are dated in the future, and so they aren’t counted in the on sales order value in this particular report. This report implies that I actually have 5 available that I can promise to someone, along with 6 more coming on a PO. That is misleading! If you date sales orders in the future (such as for orders that you want to hold off until next week), you have to watch the date selection in this report.
A Useful Feature
This is not fool-proof. Date errors can create problems, as I’ve shown. QuickBooks is not doing any “time phasing”, so you can’t easily tell how far in the future these demands are (sales orders and pending builds), and you have limited visibility on the supply dates (purchase orders). Incoming items on a P.O. may already be committed to another project or customer. You also have to remember that this feature does not stop you from selling something you don’t have, you can still sell the items in spite of the warnings.
Even with all of that, I find that the quantity available feature is very useful, and I always recommend that this be enabled as shown here. This feature helps you avoid running your quantity on hand to a negative value, which is very important in QuickBooks as negative inventory can have bad effects on your COGS calculations and your financial reports. It gives you tools that help you be more accurate in providing sales delivery promises to your customers, so that you don’t make commitments to shipments that you cannot fulfil.