Managing inventory effectively is a key component of running a successful product-based business. For many small and mid-sized companies, QuickBooks Online (QBO) offers a practical, cloud-based accounting solution that includes basic inventory tracking features. While convenient and widely used, QuickBooks Online does have several inventory limitations that users should be aware of. These limitations may affect how businesses handle inventory management, especially as they grow or require more advanced functionality.
Overview of Inventory Management in QuickBooks Online
QuickBooks Online includes a feature called Products and Services that helps businesses track the quantity, value, and movement of inventory items. This is available in the QuickBooks Online Plus and Advanced plans. Users can add products, update quantities, set reorder points, and record the cost of goods sold (COGS). For small businesses with simple inventory needs, these tools may be sufficient.
However, the inventory module in QuickBooks Online has limitations that become more apparent as businesses scale or need more flexibility. It’s important for business owners and bookkeepers to understand where QBO’s capabilities stop and what workarounds might be necessary.
Limited Bill of Materials (BOM) Functionality
One of the most noticeable limitations in QuickBooks Online inventory management is the lack of robust bill of materials support. While you can create bundled items, these are not true multi-level BOMs. The system does not support complex assembly tracking or nested components.
- No tracking of work-in-process (WIP)
- Cannot allocate labor or overhead to assemblies
- No ability to disassemble items or handle reverse assemblies
This limitation can be a dealbreaker for manufacturers or businesses that assemble products from multiple components. These businesses often have to integrate with third-party apps or upgrade to a more powerful platform like QuickBooks Desktop with Advanced Inventory or a dedicated ERP system.
Inventory Reorder Point Restrictions
QuickBooks Online allows users to set a single reorder point for each product. While this is useful for triggering purchase orders when stock runs low, it lacks flexibility. There’s no option for multiple reorder levels based on location or seasonality.
For businesses with multiple warehouses or fluctuating demand, this limitation can make stock management less precise. Users often have to manually adjust reorder points or track more nuanced details outside of the system.
No Barcode Scanning Capability
Barcode scanning is essential for modern inventory systems, especially those handling high volumes of goods. Unfortunately, QuickBooks Online does not natively support barcode scanning.
This makes receiving, picking, and shipping inventory more labor-intensive and prone to error. To gain barcode functionality, users need to integrate QBO with third-party apps like SOS Inventory, Fishbowl, or Cin7, which adds complexity and cost.
Inventory Tracking by Location Is Limited
Multi-location inventory tracking is only available in QuickBooks Online Advanced, and even then, the features are limited. While users can assign inventory to different locations, the functionality doesn’t allow for granular control.
- No bin or shelf-level tracking
- No transfer order workflows between locations
- Limited reporting by location
Retailers or wholesalers with multiple warehouses or stores may find this a serious constraint. Businesses often resort to spreadsheets or outside systems to manage inventory location details more effectively.
FIFO-Only Costing Method
QuickBooks Online uses First In, First Out (FIFO) as its only inventory costing method. While FIFO is standard and accepted for most industries, it may not be suitable for all businesses, especially those that use LIFO (Last In, First Out) or average cost for tax or reporting purposes.
With no option to switch methods, users who require alternate costing strategies must rely on external systems or migrate to platforms that offer more flexibility.
Limited Customization of Inventory Fields
QuickBooks Online offers limited ability to customize inventory item fields. While users can add basic custom fields in QBO Advanced, the fields are restricted in both quantity and type. This lack of flexibility may be a roadblock for businesses that need to track attributes such as color, size, weight, expiration dates, or serial numbers.
Without customized fields, many businesses create makeshift solutions, such as using product names or descriptions to store extra details, which can lead to inconsistent data and reporting issues.
No Native Support for Serial or Lot Number Tracking
Serial number and lot tracking are common requirements in industries like electronics, food, and pharmaceuticals. Unfortunately, QuickBooks Online does not provide built-in serial or lot tracking features.
Tracking these numbers manually or through disconnected systems can create compliance risks and reduce inventory accuracy. Again, businesses must turn to external apps or move to more advanced platforms to achieve this functionality.
Limited Reporting and Forecasting Tools
Inventory reports in QuickBooks Online are basic. Users can view reports such as inventory valuation summary and quantity on hand, but more advanced forecasting or demand planning tools are not available.
There is no predictive inventory analysis, no lead time calculations, and no way to simulate future inventory positions based on sales forecasts or seasonal trends. This can make it hard for businesses to plan inventory proactively, resulting in overstock or stockouts.
Integration Requirements for Expanded Features
To overcome many of these limitations, QuickBooks Online users often rely on third-party integrations. Tools like TradeGecko (QuickBooks Commerce), SOS Inventory, and others can add functionality such as barcode scanning, serial number tracking, and advanced reporting.
However, these integrations can be costly and may require additional training, maintenance, and support. Furthermore, syncing data between systems is not always seamless and may lead to duplication or errors if not managed carefully.
When to Consider Upgrading or Switching
Businesses using QuickBooks Online should regularly assess whether the platform still meets their inventory needs. Common signs that it might be time to upgrade or migrate include:
- Frequent manual workarounds to track inventory
- Inaccurate inventory counts or stockouts
- Complex assembly or manufacturing requirements
- Need for multi-location or multi-currency inventory support
- Desire for better inventory forecasting and analytics
In these cases, switching to QuickBooks Desktop with Advanced Inventory or adopting a full-featured ERP like NetSuite, Zoho Inventory, or DEAR Systems may provide better long-term value.
QuickBooks Online is a solid option for small businesses with basic inventory needs, especially when starting out. However, its inventory management features come with significant limitations, including lack of advanced BOM, serial number tracking, barcode scanning, and flexible reporting.
As businesses grow and face more complex inventory challenges, they may need to evaluate external add-ons or move to a more robust inventory management system. Understanding these constraints early helps businesses plan for future growth and avoid inefficiencies or costly surprises later on.