Changing Non-inventory, Inventory and Inventory Assembly Items in QuickBooks

The inventory functionality for QuickBooks works really well when set up correctly and when proper procedures are implemented. In this article we are going to investigate changing between the three type of items mentioned.

The three item types are:

* Non-inventory - which is used for items that do not require a running count and/or are not regularly kept in stock. Some examples include special order items, items that are drop shipped, etc.

* Inventory - these items have a running count of items on hand, as well as a cost based on a moving average. It is extremely important to purchase these items before you sell them and to regularly do a physical count to confirm accuracy.

* Inventory Assembly - these are the items which include a bill of materials to combine other items into a new item. These can be simple assemblies, like combining items with packaging for a gift basket or more complex, as is the case of combining raw materials with labor to build an entirely new item. This feature is not available in QuickBooks Pro, for QuickBooks Premier the bill of materials on the item is what will be used for the build, for QuickBooks Enterprise Solutions the bill of materials can be edited as part of the build process if an item has been substituted, the quantity has changed for this build, etc.

Changing items only can be done in one direction: non-inventory to inventory/inventory assembly; and inventory to inventory assembly. When editing the item to change the type, a warning will appear reminding the user that the action is NOT reversible and once you have converted the item, you will not be able to change it back. Once you click on OK, you can edit the item as needed: check the box in the middle of the item for inventory assemblies to have both a purchase and sales information box; add a bill of materials for an inventory assembly type item; etc. When saving the changed item, a warning will again appear reminding the user that this change cannot be undone with an instruction to click on OK to change this item's type.

Keep in mind that all the historical transactions will be changed when making this change. This can have a significant impact on the financial statements when changing from non-inventory to inventory type parts that have not been recorded properly in the past. For example, if an item has been sold, but the purchase was recorded using a Cost of Goods Sold account rather than using the item, the result will be a negative count after the conversion.