• Purchase orders keep it tidy
• Receiving: Bill arrives with shipment
• Receiving: Bill arrives separately
• What if there's no PO?

Purchase Orders Keep It Tidy

When ordering inventory from vendors we suggest you create purchase orders. Purchase orders keep your inventory records in ship shape. They also let you see what you've ordered by running the Open Purchase Orders report.

Quick Tip: Tips for setting up inventory items
Before creating purchase orders you must turn it on in preferences. From the Edit menu select Preferences > Purchases and Vendors. From the Company Preferences tab, select the "Inventory and purchase orders are active" checkbox.

• Go to the Vendors menu and click Create Purchase Orders.
• Click the Vendor drop-down list and choose an existing vendor or enter a new vendor.
• (Optional) Change the entries in the Vendor (address), Date, P.O. No, Ship To, Expected, or FOB fields.
• Fill in the line item area by entering the items you're ordering, just like line items on an invoice.
• Save the purchase order.

Option 1: Bill Arrives with Shipment

How you receive vendor items into inventory varies slightly whether you received the bill with the shipment, or if it will arrive separately (more typical; see below). Follow these four steps if your shipment includes a bill from the vendor:

Step 1: Open a new item receipt with bill

• From the Vendors menu select Receive Items and Enter Bill. The Enter Bills window opens with the Bill Received box checked.

• Select the vendor's name.
  -QuickBooks displays a list of the vendor's open purchase orders.
• QuickBooks lets you know the vendor has open purchase orders. Select yes.
  -QuickBooks displays a list of the vendor's open purchase orders.
• Select the purchase order matching the shipment and select OK.
  -QuickBooks transfers the PO's contents to the Bill.

• Check the packing list against the items from the PO.
  -If necessary, access the original PO by selecting Show PO on the Enter Bill window.

• Record the shipment's items into the Qty column on the Enter Bill window. Make sure to receive the exact items listed on the packing list.
  • If this is a partial shipment, enter only those items you received. For example, if the PO lists a quantity of 10 but you receive only 5, change the quantity to 5.
  • If you receive more items than originally ordered — an overage — determine whether to keep or return the goods. If you decide to keep the overage, change the quantity accordingly. If you don't want the overage, return them to the vendor.

Quick Tip: Display a list of open POs
To quickly see your open purchase orders follow these steps:

1. Select Vendors Center from the Vendors menu.
2. Select the Transactions tab.
3. Select Purchase Orders.
4. Click the Filter By drop-down list and choose Open Purchase Orders.
   -See more detail by double clicking on any purchase order in the list.

Option 2: Bill Arrives Separately

Typically the bill will arrive separately from the shipment. In that situation follow these five steps:

Step 1: Open a new item receipt only

• From the Vendors menu select Receive Items.
  • The Create Item Receipts window opens with the Bill Received box unchecked.
  • Notice that the Receipt displays "Item Receipt Only" indicating you are not now entering a bill, as seen in Figure 6 below.

1. Select the vendor's name.
2. QuickBooks lets you know the vendor has open purchase orders. Select yes.
   - QuickBooks displays a list of the vendor's open purchase orders.

3. Select the purchase order matching the shipment and select OK.
   -QuickBooks transfers the PO's contents to the Receipt.

1. Check the packing list against the items from the PO
   -If necessary, access the original PO by selecting Show PO on the Create Item Receipts window.

1. Record the shipment's items into the Qty column on the Receipt window. Make sure to receive the exact items listed on the packing list.
   • If this is a partial shipment, enter only those items you received. For example, if the PO lists a quantity of 10 but you receive only 5, change the quantity to 5.
   • If you receive more items than originally ordered — an overage — determine whether to keep or return the goods. If you decide to keep the overage, change the quantity accordingly. If you don't want the overage, return them to the vendor.

1. Select Enter Bill for Received Items from the Vendors menu.
2. Select the vendor from the list.
   -QuickBooks lists the vendor's outstanding item receipts.
3. Choose the receipt you entered when the order arrived.
   -When you click OK, QuickBooks turns the receipt into a bill. Make any changes or edits, then click Save & Close.

Quick Tip: What happens in QuickBooks?
After you save the bill or receipt, QuickBooks:

1. Increases your accounts payable by the amount shown on the item receipt.
2. For each inventory item on the receipt, adjusts the quantity in stock (thereby increasing your inventory asset account), lowers your quantity on order, and recalculates your average cost for each item.

What If There's No PO?

Sometimes you receive inventory without a purchase order. When that happens, follow these steps:

1. Select Receive Items from the Vendors menu.
2. Choose the vendor (or <add new>) from whom you received the items.
3. Include a Ref No and Memo to help you identify the item receipt later.
4. Click the Items tab and enter the relevant information as needed.
5. Save the receipt.

Go Forth and Order Inventory

That's all there is to it. As a next step, try running the reports under Purchases from the Reports Center (accessed from the Reports menu). It's a good way to anticipate orders. Speaking of reports, we'll examine inventory-based reporting next time in Part 3.


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