InventoryIQ: Everything you need to know

InventoryIQ, Finaloop's inventory management product, tracks every unit you buy and sell, so your books reflect cost of goods sold (COGS), stock balances and stock values at the SKU level and the warehouse level.

You're reading this either because you've decided that InventoryIQ is the best inventory solution for you (good choice!), or because you want to know more about it. If you're still not sure which inventory method is best for your business, head over to How to choose your COGS tracking method in Finaloop.

You can also watch this short video to introduce you to the benefits and key features of InventoryIQ:

Because there's quite a bit to go through, we've split the article into bite-sized chunks. Take it easy! It's an article you might want to come back to for a refresher. If you're setting up for the first time, follow along with Step-by-step guide to setting up InventoryIQ.

Before we dive into what's involved in using InventoryIQ, here's a refresher of some key inventory terms.

Inventory items can have one of three statuses, and because purchase orders (POs) can arrive in multiple shipments, each shipment has its own status.

Accurate tracking of the inventory status is a key component of how we track which units were received first and how we calculate your COGS on a first-in, first-out (FIFO) basis.

By default, a PO reaches your books on its Production started date. If you'd rather recognize POs when they ship, choose Shipment date under Recognition date in Inventory → Supply chain → Preferences.

Your landed cost is the full cost of getting a product to your warehouse, including shipping, duties and fees. When you create a PO, you'll add the direct cost of each inventory item. Then you add indirect costs and discounts, as relevant, to get a more accurate picture of the actual costs of your inventory at the unit level.

The landed cost tells you the exact cost of each unit of a given SKU. One of the key benefits of using InventoryIQ is that, despite the constantly fluctuating nature of these costs, we'll automatically track the landed cost for each item.

For each inventory item (SKU), the landed cost is the direct cost of inventory items purchased + indirect costs for those items / number of inventory items.

Here's an example.

The landed cost per unit is (2,000 + 500) / 100 = $25.

When creating a PO, indirect costs are allocated automatically between the products based on their direct cost, unless you choose to allocate them manually.

Indirect costs include any additional costs incurred to get the inventory to your warehouse that aren't related to the direct costs of the items themselves. Here's the list of indirect cost types:

You can also add a Discount line to a PO, which lowers the landed cost of its units.

To learn more specifics about creating and managing POs in Finaloop, check out Managing your POs in Finaloop, and for more on landed costs, head over to How to calculate your landed cost per unit.

FIFO stands for first in, first out. InventoryIQ uses the FIFO method to calculate the value of inventory items on any given date.

When you sell products, Finaloop uses the cost of the items (based on the PO) that have been in that warehouse the longest. When there's no more stock from that PO, Finaloop takes the costs from the next PO received, and so on.

Example:

InventoryIQ records this as a stock reduction of 15 items: 10 priced at $10 and 5 priced at $10.50.

As you purchase items, the stock numbers and values in the Balance Sheet increase, and when you sell, they decrease and instead become COGS.

The Vendor balances tab shows the total amount owed to your inventory vendors. It shows the rolling balance and any unpaid bills.

The first step is to set up warehouses and choose a default warehouse for each sales channel. This allows us to track stock per warehouse.

We'll walk through the basics of managing your warehouses here.

Warehouses synced automatically through your integrated channels are listed on the Warehouses tab, or you can add them manually.

① Add warehouse, ② Edit defaults, ③ Edit.

To add a warehouse manually:

The warehouse now shows in your list. Each warehouse you added has an Edit button, and a warehouse synced from a connected channel has a View button instead. If the same location appears more than once, click Merge/Split to combine them.

You can set a default warehouse for each sales channel. If there's no default set for a particular sales channel, Finaloop pulls orders from the general default warehouse.

To create a default warehouse for a sales channel:

If you sell through Amazon FBA, Finaloop adds your Amazon warehouses when you connect your Amazon account, so you can set one as your default for Amazon. If your Amazon account isn't connected, create a separate warehouse called "Amazon FBA" and set that as a default. We use it as a virtual warehouse to track your FBA sales and quantities.

Generally warehouses are active, but you can mark one as Inactive when you no longer record sales, fulfillment or stock at that location. There are a few things to note about inactive warehouses:

Because we're tracking inventory costs and movements at the SKU and warehouse level, Finaloop needs the opening inventory balance for each SKU in each warehouse, including the number of units and the average cost per unit. Your opening inventory balances are your stock as of the beginning of your InventoryIQ start date.

To create opening balances for each SKU:

① Import CSV, ② Actions, ③ the duplicate icon.

Now your opening balances are all set! You'll see the updated total in Opening balance as of at the top of the page.

Now that you've set up warehouses and have opening balances for each SKU, the next piece is to create POs for every inventory purchase in Inventory → Supply chain → Purchase orders.

POs are the cornerstone of how Finaloop calculates COGS and inventory. We use POs to determine the landed cost of each item and the order in which stock comes into each warehouse. When you fulfill a sales order for a customer, we automatically take the landed cost for each unit sold on a FIFO basis to calculate the exact COGS of each order.

For FIFO to work correctly, Finaloop needs historical purchases too, for example POs you created in a previous year but didn't receive until the current year.

To see how to add historical POs, head over to Managing your POs in Finaloop.

In InventoryIQ, you'll be able to manage the balances you owe to your inventory vendors.

To manage your vendor balances, go to Inventory → Inventory vendors → Vendor balances. Here you'll see a list of all of your inventory vendors from POs, stock transfers, assembly costs from your recipes or assemblies, or from bills or payments from your bank account or credit cards that were categorized into one of the inventory-related categories.

For each vendor, you'll see:

You'll also see the total balances at the top of the tab. If any vendor has a negative balance, turn on the switch that reads inventory vendors have negative balance to see only those vendors.

① The total balances, ② the negative balance switch, ③ a negative Rolling balance.

Click on a vendor to see the details. Here you'll see two tabs: Rolling balance and Bills. The Bills tab appears when the vendor has bills.

① The Rolling balance and Bills tabs, ② the balance cards, ③ Add adjustment.

Rolling balance tab: the balance cards at the top show how the rolling balance is calculated.

Purchase orders + Shipment costs + Stock transfers + Assembly costs - Bills - Payments + Dropshipping balance = Rolling balance

Finaloop only shows the cards that apply to the vendor. If you see a negative vendor balance here, it's likely you're missing a PO, stock transfer or assembly cost.

Bills tab: here you can see all bills for this vendor that were synced from Bill.com or Settle, or that you created in Finaloop. You'll also see any payments that were linked to the bills. Check out Managing your bills (payables) for more details.

If you added a historical PO and already paid a portion of it before the date you started with InventoryIQ, you'll need to add a historical payment as well so your vendor balance will be accurate.

To add a historical payment:

The historical payment now shows in the vendor's Rolling balance tab.

As orders progress, it's important to update POs when you receive additional information regarding production and shipping.

To see the workflow steps related to status changes, head over to Managing your POs in Finaloop and Managing your Shipments & Receipts.

If you transfer stock between warehouses (or from your warehouse or 3PL to Amazon FBA), you'll need to add these transfers as well.

① The Transfers tab, ② the Stock transfer button.

Using InventoryIQ you'll find a wealth of information about each SKU on the Products page, either because we synced it from Shopify or Amazon, or because you added each SKU yourself.

Typically you'll want to:

Finaloop stores a stack of detail about each SKU, all available from the Products page.

When you turn on More details, you also see Opening balance, Purchased and Net units depleted. Opening balance + Purchased + Net units depleted = On-hand units. Units that are in transit aren't part of your on-hand units and show in their own In-transit units column.

To see the unit breakdown for each product by warehouse, click the arrow next to each SKU.

① More details, ② Attributes, ③ the warehouse breakdown.

When you click into a specific product, you can see all the stock data for that product. When you click a SKU, Finaloop shows five tabs: Stock, FIFO, COGS, Recipes and Assemblies.

Here's a summary of what's on each tab.

Finaloop automatically adds COGS for Shopify, Amazon, TikTok Shop and Walmart when the channel's switch is on under Sales channels – report per SKU in Inventory settings, and for any invoices sent through Finaloop. If you use other sales channels, you can add COGS manually, either in a bulk upload or individually in each SKU.

Use Bulk unit edit to easily report dead inventory, product giveaways or product donations across all relevant SKUs too.

Here's how it works. To add COGS to sales channels in bulk:

① The tabs, ② Sales channel, ③ Update method, ④ Actions.

You can also click Actions → Import CSV file and follow the instructions to add the quantities for all of your SKUs in one quick upload, and you can duplicate a row from the right side of the row to add multiple months for each product at once.

To add COGS to sales channels manually for each unit:

① The warehouse dropdown, ② Add to COGS.

For Shopify and Amazon, if you change quantities that we pull automatically, you can see the original quantity in the tooltip.

It takes a moment or two for the screens to update and show the changes. Go to the Inventory → COGS page to see the COGS per channel, dead inventory, product giveaways and product donations. You can also see the updated unit and cost data on the Products page.

If you see an alert that reads Units with missing costs at the top of the Products page, some units were depleted when Finaloop had no stock recorded for them. Typically, this is caused by no opening balance for that SKU or an incorrect balance, missing POs or transfers, or an inaccurate quantity or date on a PO or transfer (an inaccurate date can create a time gap which may also result in units with missing costs).

Turn on Show products with missing cost units to see only those products. To identify and fix the missing data, check out Why do I have units with missing costs? and Why do I have units with missing costs in InventoryIQ?.

There are some indirect costs, like packaging paper to ship orders to customers, that aren't strictly indirect inventory costs. If you have indirect costs that you don't think should be reflected on a per unit basis, you can treat them as incidentals. This removes the costs from inventory and moves them to COGS in your P&L. They won't be included in calculating your landed costs per unit.

To reclassify these expenses:

Finished products and Supplies & materials can't be treated as COGS under US tax rules. For those categories, you can change the category in the Transactions page to Other incidental supplies instead. Finaloop also shows a tax warning if you change categories such as shipping, so read it before you save.

For more on incidentals, head over to How to expense small supplies like bubble wrap directly to COGS (incidentals).

Merging products allows you to group several products together under one primary product.

This is a great feature if you have identical products from multiple sources, such as Amazon and Shopify, and you want to apply cost updates to both products at once.

To merge products:

① Make primary, ② Save.

The products now show on the Products page as one product, and the Merged attribute icon shows on its row.

To find merged products later, click Filters, select Merged under Attributes, then click Apply.

For more information on how to merge products and how they impact your financials, check out Merging multiple products.

To export a list of your inventory-related bills and transactions from your banks and credit cards to a CSV file, go to Inventory → Inventory vendors → Bills & payments. Select the rows you want, click Actions and select Export.

You can create and manage recipes, also known as a bill of materials, or assemblies using InventoryIQ.

Recipes are often used for brands that manufacture or produce their products from various components or raw materials, or for bundles of multiple products.

Using recipes, you can create on-demand assemblies or you can create manual assemblies on an as-needed basis. To learn more about creating and managing recipes and assemblies in InventoryIQ, see Managing recipes & assemblies.

To learn more about how to manage your dropshipping transactions, check out Managing Dropshipping (InventoryIQ).

Sometimes, when you conduct a physical count of your inventory in your warehouse, you may find some discrepancies between the units you have on-hand and the units you have recorded in Finaloop. No worries: the Physical counts page helps you reconcile your recorded inventory based on your physical stock count.

To learn more about how to record a physical count adjustment in InventoryIQ, check out InventoryIQ: Adding adjustments based on a physical count.

InventoryIQ is available as an add-on to your Finaloop plan, and its price depends on the gross revenue of your business. You can try it free for 14 days.

To learn more about our pricing plans, check out Finaloop plans and pricing.

If you have any questions, our team is here to help. Reach out to us at [email protected].