Inventory Part vs Non-Inventory Part vs Service Item in QuickBooks Desktop: Which to Use

Before you start

• Turn on inventory if you'll track stock: Edit > Preferences > Items & Inventory > Company Preferences, then Inventory and purchase orders are active. Inventory Part isn't available until you do.
• For each product, decide whether you need to know how many you have. That one question settles most choices.
• Look in your Item List before you add anything. Intuit advises against setting up the same item twice.
• Choose the type before the item goes on transactions. Changing it later is limited, and some changes can't be undone.

The item types compared

Step 1: Pick the type with four questions

1. 1Do you need to know how many you have? Use Inventory Part, or Inventory Assembly if you build it from components.
2. 2Is it a product you don't track, such as supplies you use up or a part bought for one job? Use Non-Inventory Part.
3. 3Is it work you or a subcontractor perform? Use Service.
4. 4Is it a charge on the invoice that isn't a product, such as freight? Use Other Charge.

Intuit applies the same test to manufacturing components. Track a component's quantity and it's an inventory part. If you can't or don't track it, make it a non-inventory part. Fees you add to each build are other charge items.

Step 2: Create the item

1. 1Go to Lists > Item List.
2. 2Select Item, then New.
3. 3Choose the type.
4. 4Enter the Item Name/Number. You can use up to 31 characters.
5. 5For an Inventory Part, fill in purchase and sales information, then Asset Account, Reorder Point, Quantity on Hand, Total Value and As of.
6. 6For a Non-Inventory Part, Service or Other Charge, the purchase checkbox is optional. Select it if you buy for a specific job, use a subcontractor or pass the charge on.
7. 7Save the item.

The inventory fields are covered in How to add inventory items in QuickBooks Desktop. For products you build, see How to set up a bill of materials and build assemblies.

Changing an item's type later

• Open the item from Lists > Item List, choose a new Type and select OK.
• Intuit lists inventory (Windows only), non-inventory and other charge items as the types you can change, and the choices are limited.
• Once an item becomes an inventory or service item, you can no longer change its type.
• When you convert a non-inventory or other charge item to inventory, set As of to a date after the item's last transaction. With an earlier date, you have to enter all its sales and purchases up to today.
• If you can't change the type, one option is a new item with the right type. QuickBooks won't delete an item used on any transaction, but you can make the old one inactive.

Common mix-ups

• Tracking stock with Non-Inventory Parts: QuickBooks keeps no quantity on hand or value for them.
• Bundles: for products you buy or sell together but don't track as one item, use a Group. For a product you assemble and stock, use an Inventory Assembly.
• Discounts on purchase orders: Discount items are for sales forms only. Intuit suggests an Other Charge item with a negative amount on purchase orders and bills.
• Assemblies in Pro: Pro can't create them, but any edition can view and edit assembly items and the transactions that use them.
• Nesting: every item type has a Sub-item of field for grouping items under a parent.

For more on these choices, see Raw materials vs finished goods and Group items vs inventory assemblies. In Enterprise, see How to use item categories in QuickBooks Desktop Enterprise.

Where QuickBooks Desktop leaves the work to you

• Someone has to choose the type for every product and keep the choice consistent across thousands of SKUs.
• A product set up with the wrong type often can't be fixed in place. Correcting it can mean a new item and a cleanup of its history.
• Non-Inventory Parts give no stock count, so any quantities that matter are tracked outside QuickBooks.
• Item limits apply: Pro and Premier hold up to 14,500 items, active and inactive combined.