How to Set Up Products and Services, Invoicing and Reports in QBO

Hello, everyone. In today's tutorial, we are going to be talking about products and services and what they mean in QuickBooks Online, how they relate to your reports and how to set them up. So first of all, what exactly is a product and service? And basically what they are are the offerings that your business to your customers. They are necessary for tracking sales and revenues, and they help you to categorize income and expenses for reporting purposes. And what that means is you can have a line item on your profit and loss statement that is simply services, but which comprise many different types, deal detailed types of services that you provide. And similarly, you can do the same for products. And keep in mind that you could set up the income statement any way you like in whatever makes most sense to you, but you don't want to have too many categories of income, otherwise it leads to clutter, essentially on your income statement, your profit and loss statement, which makes it a little less meaningful. So the types of products or services that you can have in QuickBooks Online are physical goods. So the Sherlock Holmes Detective Agency sells things like audio recording devices, magnifying glasses. So those would be the physical goods. Or you could have services. And in their case, they sell consulting services, they sell surveillance services, and they sell detective services. So let's take a look at an existing product or service. So we have here an audio recording device, and I'm just going to click on edit and let's go over all of the different fields that need to be filled out. So we have the name which is an audio recording device. If you had this in inventory, if you had a big warehouse, you could have an SKU number that you assign to it. The category refers to the way that you want to organize it in this section here and on your reports. So categories are useful when you have numerous services and products that might roll up to one category. So audio recording devices might fall under the surveillance equipment category, for in this particular case, simply equipment. And because maybe you sell 10 different types of equipment, you might want to see on your reports a total amount of equipment that is available. There is various reports, inventory reports, sales reports, and it will summarize it by those categories. So because Sherlock Holmes Detective Agency is quite small, they only have a handful, handful of items here. I am not going to choose a category, it is not necessary a class as well. Another level of categorization, classes and locations are only available in advanced versions of QuickBooks. And I do have a blog post about it which I will link to in the description. The next thing is the description section and you check whether you sell this product service to your customers. If you don't check it, then it'll be available for bills, but not necessarily for customers. You can enter a description if you'd like. And this will pre populate on the invoice. And we will see that when we do an invoice you have your sales price rate. So this could be how much you intend to sell the audio recording devices for. But remember. And this will pre populate on the invoice. But remember, this can always be changed. The most important part of this form is that you enter the income account. And as previously mentioned in this case for Sherlock Holmes, he has product sales and consulting services and everything rolls up to one of those two categorizations. So we're basically mapping it to one of these accounts. In this case it's a bug, it's an audio recording device. So it is actually the sale of a product. So we're going to put it to product sales. And again, we can have numerous types of equipment that we sell, all of which will map to the product sales account. And keep in mind you can also do reports and we're going to look at reports all on your service and product offerings here. If you have recurring templates, you could update the price in the recurring templates, which is again, you can create templates in QuickBooks online and inclusive of sales tax. It is in Canada unusual that your price will be inclusive of sales tax, but it's not unheard of in this case. Sherlock Holmes charges sales tax on top of the price.

The sales tax, because he's based in Ontario and many of his clients are in Ontario. We're going to choose HST Ontario. But remember that gst, HST are based on the province in which the customer is located. So we can choose a default that will appear on the invoices. And this can always be changed if your customer is located in another province. And then there is this other section where you purchase this product or service from a supplier. And this allows you to enter this item on a bill. A bill has two options. You can enter directly the account from the chart of accounts, or you can enter an item item on a bill which is a product and or service again, that will map to the expense account indicated here. And so you could put a description directly from the supplier here. If you buy from them often, you can put the cost from the supplier again inclusive of purchase tax. Generally speaking, they will charge it on top. And in this case the supplier of Magnuson Electronics is located in Ontario. So I will have a default of HST Ontario, but I can purchase the audio recording devices from another supplier and then I can update that directly on the bill. None of these fields are set in stone. The only one that is is the mapping to the income account, the name of the product or service.

So we are just going to close this and that's essentially if you were to enter a new one, you would choose, if it's a service, you would choose service otherwise in terms of inventory or non inventory. The difference is whether you have inventory functionality in your version of QuickBooks and you are tracking how much inventory that you have. In that case you would select inventory. That way every time you bought something it would add it to the inventory and every time you sold something it would take it out of inventory. If you do not have inventory functionality then you would show it as non inventory because you're not really tracking it. But it is kind of an inventory item. And with our audio recording device you will see see that it is non inventory. You also have the option to change the type if you want. So say you decide to get inventory tracking at a later date, you can change this to inventory and update the information.

So that's basically how you would add a product or service. Now let us look at an invoice. So we're going to go to plus new. I am going to click on invoice.

And I am going to sell some surveillance services to Scotland Yard as well as some audio recording devices. So this is Scotland Yard. If you had set up your customer properly, the billing address would show up and you can simply go to customer and edit this information or you can enter it directly here. So I'm going to enter Toronto, Ontario just so we have something, but it won't go in and update all of the customers. You want to do that directly in the customer profile you can put in terms Scotland Yard owes us the payment for invoice within 15 days. You'll notice the due date is 15 days after the invoice date at location and classes as we spoke about is a little advanced and subject for another tutorial. But just suffice it to say that you can categorize by this. This can be quite useful if you have a lot of transactions.

Your sales rep, you can add a sales rep here. I'm just going to add Watson because he is the person who gets Sherlock Holmes all of his cotton yard business. And now we are going to enter the product or service. So from the drop down I am simply going to enter surveillance services. There's no description here. So I will put evening of.

October 5th.

Moriarty, because that's who we're going to be surveilling I expect. And the job is $950 regardless of how long it takes. And this is the rate. Now in Scotland Yard's case we charge a slightly different rate because we have a lot of business with them. So I'm going to only charge them $900. So even though this comes populates directly from what we entered in the product or service, we can edit this. Scotland Yard is indeed located in Ontario, but I can click on the drop down and choose another province if necessary. And amounts are exclusive of tax. So the sales tax is added on top of this and you'll see my total invoice is $900 plus HS. I also want to sell them some, they really like our bugs and so I'm going to sell them some audio recording devices.

This is fine bugs use on client jobs. I'm going to leave this description and they asked for 10, so I'm going to put in 10 and that's an additional $1200 and $50. Again I'm going to give them a slight discount so I'm going to change that to $120. And they are located in Ontario. And so this updates my invoice. Alternatively I could have left this at 950, left this at 925 and just given them a 10% discount and that updates that here as well. So that's basically it for the invoice. So we are going to save and close this and now I'm going to show you the profit and loss report.

To see how it feeds into that. And then we are going to look at a report that is specifically for products and services. So let's click on the profit and loss report I'm interested in this month run report.

And you'll see here that these are my transactions for this month. So we know we sold some consulting services, that is surveillance services. So I'm going to click on this and you'll see we have an invoice that we just entered here which is evening of October 5th, Moriarty. And if we click on that we can see the details of the invoice. So even though it's surveillance services, it feeds into the consulting services account.

Now if we look at product sales, we also have the same invoice and this second part of the invoice went into product sales. So even though we only have one invoice, each of these line items fed into A different account on the profit and loss statement. So this is very useful in terms of separating your sources of income.

So that's. We'll go back to the report summary and that's what we have. So now let's say we want to see exactly what products and services we sold in the month of October. So let's go to reports.

And generally you can search for report by just entering the products and.

Just entering the type of report that you want. So you'll see I've entered product or I can enter service and I can have sales by product service summary. So let's click on that. Alternatively, if you scroll down, you have your sales and customers and you can just click on the report that's right here. So click on that and you can see now, in this month we have sold 25 audio recording devices. That's the total amount, percentage of sales, average price. And then we have some stuff that's not specified. Let's click on that and let's see where that comes from. And that is a discount.

And that is this discount percentage. So I personally don't love to enter discounts this way. I prefer to, in fact, if I want to put a discount, enter it this way and that way it will show up properly on the product and service report. So let's try this. And we are going to put -2, 20 and I am going to adjust this to zero. And so we have the same basically invoice, make sure that the sales tax is selected. Okay, so we're going to save and close.

And this is gone. So we go back to the report summary and now it goes under its proper category of discounts.

You can also click on this to see the details by each category. And this gives you all of the details.

And finally you can export this report to Excel, click on export to Excel and then manipulate it further. And this can be super useful if you have a lot of data and you really want to slice and dice the. And finally, finally you can click on this and you actually have different fields that you can create a filter for. So perhaps you want to see your sales reps and you want to see the tax code and the tax amount. That's. That can be a common thing that you do. So you'll see here Watson is the sales rep. And this is useful especially when you have at least more than a couple of sales reps. So you can produce reports by the products and services that they sold. Also you can see the tax code, the tax amounts. So again, there's all kinds of stuff that you can do. And if you want to see this report regularly, you click on Save Customization, click on Save. And then when you go back to the report list, you can go to.

Custom Reports, click on this and then see what we were just looking at and just change the date to whatever day you want to want to see.

So that concludes our tutorial on products and services. I hope this was useful. If you have any questions at all, please leave a comment and I will be happy to answer it. And please like and subscribe and sign up to my newsletter, which you can find@montrealfinancial.com have a great day.