How to Track Inventory in QuickBooks Online

If you sell physical products, your stock is one of the biggest numbers on your balance sheet and one of the easiest to get wrong. QuickBooks can keep the count and the cost for you, but only if it is set up correctly from the start. Here is how to track inventory in QuickBooks Online, from turning the feature on to keeping your counts accurate.

Last verified: September 2026.

Which QuickBooks Online plans support inventory

Inventory tracking is not available on every plan. As of this writing, it is included in QuickBooks Online Plus and Advanced, and not in the lower tiers such as Simple Start and Essentials. If you are on a lower plan, you can still sell products, but QuickBooks will not track quantity on hand or calculate cost of goods sold for you. Plan features change, so confirm on the current plan comparison, and see our breakdown of QuickBooks pricing and every plan for how the tiers differ.

How to track inventory in QuickBooks Online: turn the feature on

1. Open the Settings menu and choose Account and settings.
2. Go to the Sales tab and find Products and services.
3. Turn on Show Product/Service column on sales forms and Track quantity and price/rate.
4. Turn on Track inventory quantity on hand.
5. Save your changes.

Once this is on, you can create inventory items instead of plain products.

Add your inventory items

1. Go to Sales, then Products and services, and choose New.
2. Select Inventory as the item type.
3. Enter the name, an SKU if you use one, and the selling price.
4. Set the initial quantity on hand and the as of date. This is the count you have on that day, and it is the most important number in the whole setup.
5. Choose the accounts. QuickBooks creates an Inventory Asset account and uses a Cost of Goods Sold account. Confirm the income account is the right sales account for the item.
6. Set a reorder point if you want QuickBooks to flag low stock.

If you have many items, import them from a spreadsheet instead of entering them one by one, and check a few against your physical count afterward. Your account structure also matters here, so review our guide on setting up a chart of accounts correctly before you load a large catalog.

How stock goes up: recording purchases

Quantity on hand increases when you buy inventory, but only if the purchase is recorded against the item. Enter a Bill, Expense, or Purchase Order and add the inventory items in the item details section, with the quantity and the cost. If you record the purchase as a plain expense using a general category, your cash goes down and your stock count does not move, and your books are wrong from the first order.

How stock goes down: recording sales

When you sell an inventory item on an invoice or a sales receipt, QuickBooks reduces the quantity on hand and moves the cost from Inventory Asset to Cost of Goods Sold automatically. QuickBooks Online values inventory using first in, first out, meaning the oldest costs are used first. Your Profit and Loss then shows revenue and cost of goods sold, which gives you an accurate gross profit.

Adjust for losses, damage, and recounts

Physical stock and QuickBooks drift apart over time through breakage, theft, and counting mistakes. Fix the difference with an inventory quantity adjustment, which you can find under the New button. Enter the counted quantity and choose an adjustment account, typically an inventory shrinkage expense. Do this after every physical count, not only once a year.

Reports worth checking regularly

• Inventory Valuation Summary: shows the quantity and total value of each item, and should match the Inventory Asset balance on your Balance Sheet.
• Physical Inventory Worksheet: a printable list to count against.
• Sales by Product/Service: shows which items actually sell.

If the valuation total and the Balance Sheet do not agree, something was recorded outside the inventory item flow. Reading your reports correctly helps here, as covered in our guide to running a P&L report that makes sense.

Common inventory mistakes in QuickBooks

• Turning on tracking without a real starting count. QuickBooks trusts the number you enter. If it is wrong on day one, every report is wrong afterward.
• Selling before you record the purchase. QuickBooks can show negative stock, which distorts your cost of goods sold. Record purchases promptly, and enter bills in date order.
• Recording stock purchases as ordinary expenses. Your inventory asset never increases, and your expenses look inflated.
• Skipping physical counts. QuickBooks tells you what should be on the shelf, not what actually is.
• Mixing up variants. A product that comes in three sizes usually needs three items, not one.

When QuickBooks alone is not enough

QuickBooks Online is an accounting tool with basic inventory features. If you manage multiple warehouses, lot numbers, or complex bundles, or you sell heavily online, a dedicated inventory app connected to QuickBooks usually works better. If you sell through an online store, our guide on connecting Shopify to QuickBooks explains how to keep sales flowing in without manual entry.

Frequently asked questions

Can I track inventory in QuickBooks Online Simple Start?

No. Quantity tracking is limited to higher plans. On lower plans you can list products, but stock levels and cost of goods sold are not tracked for you.

How do I set my starting inventory?

Enter the initial quantity on hand and the as of date when you create each item. Use a real physical count taken as close to that date as possible.

What happens when I sell more than I have?

QuickBooks may let the sale go through and show a negative quantity, depending on your settings. Fix it by recording the missing purchase, and see that the dates line up with the sale.

Does QuickBooks Online use FIFO or average cost?

QuickBooks Online values inventory using first in, first out. If your accountant wants another method, ask them how to handle it before you build your setup.

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