V8 - Processing drop-shipped purchase orders

 

SOS Inventory supports drop shipping items directly from a vendor to a customer. To issue a drop-ship PO, simply check Drop ship on the purchase order and then enter the intended customer’s information in the Shipping address block. Drop-ship POs are not included in the “On PO” calculation, as they are not incoming inventory. When you receive confirmation from the vendor that the items have shipped, update the PO with tracking information (if so desired) and then close the PO. As long as you have set up your items correctly (where the expense account in QuickBooks Online is the COGS account), then you could do a copy to bill in QuickBooks Online as that bill will affect accounts payable and COGS directly.

 

In Purchasing settings, the option Automate drop ship purchase orders closes a drop-ship PO automatically and sends journal entries to QuickBooks Online that post against accounts payable and COGS.

 

Typically, when someone uses the drop-ship option, they go through the following steps:

 

  1. Create an invoice for the customer.  This affects the income account and accounts receivable (A/R) in QuickBooks Online.
  2. Ensure the Automate drop-ship purchase orders option in Purchasing settings (Settings > Purchasing settings) is turned on.
  3. Create the drop-ship PO from the invoice. This generates an accounts payable to vendor and COGS journal entry in QuickBooks Online. The PO also closes automatically.
  4. Send the invoice to customer as needed (either immediately or when product ships).

 

Some SOS users do not like this method as the journal entry that affects accounts payable and COGS does not have a due date on it like a bill would.

 

Another method of completing a drop-ship PO is as follows:

 

  1. Disable Automate drop-ship purchase orders (go to Settings > Purchasing settings).
  2. Create a sales order.  Mark it as drop ship.
  3. Create the PO from the sales order.  As the sales order is marked as a drop ship, the PO will automatically be marked as a drop ship.  The PO will sync to QuickBooks Online.  This PO will be open.

  4. Once you have received confirmation that the item has shipped, you must:

    1. Receive the PO. 
    2. Create the shipment from the sales order. 
    3. Create the invoice from the sales order.

 

The receiving will create the bill in QuickBooks Online (affecting accounts payable and asset/expense accounts of the item).  The shipment will create a journal entry in QuickBooks Online (affecting asset and COGS accounts). The invoice will sync to QuickBooks Online (affecting the accounts receivable and income accounts).

 

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