QuickBooks Online users have begun reporting errors related to inventory items with transactional histories of over 25 thousand. The typical error reported is "Business Validation Error: Item attached to a significant number of transactions cannot be processed.1"
Wow - suddenly, QBO is looking more like Desktop after all... just not in a good way!
Typically, the error occurs when transactional data involving inventory items is imported (synchronized) using an eCommerce app. However, it can also occur when users key in transactions if their QBO company file (database) has a large enough transactional history for inventory items, even with just a few items.
In order to track QBO inventory, Intuit chose FIFO (first in, first out) cost accounting to value inventory assets after the purchase and sale of inventory. This method records the purchase of an inventory item as a 'quantity X price' lot. Similarly, each sale of an inventory item is recorded as 'quantity at lot-cost,' which is determined by the available number from the oldest lot still in stock.
This means that every time an item is sold, the entire transactional history must be queried for that item and computed according to an algorithm of first available at lot cost of first available plus next available at lot cost of next available, etc. You potentially, if selling thirty of the same item might have thirty different lot costs involved in the costing of a single item.
Because QBO uses this FIFO cost model for inventory, the more transactions associated with an inventory item, the larger the 'lot history' of that item that must be queried every time an item is sold to determine the item's 'cost.' When an item has a history of 25 thousand or more transactions, there might be millions of lot and lot cost computations to be processed for each new transaction involving the same item.
Intuit reports that when transactions are written to the QBO database in a non-chronological order, the complexity of computing the FIFO history of these items with large histories can "take several hours to complete and results in a lock on the company database until the operation is completed. All subsequent actions will be blocked while the database is locked."
To deal with this problem, Intuit recommends:
(1) Always create QBO inventory transactions in chronological order.
Commentary: This might be remotely possible if you had one person entering inventory transactions in a small business, but not for a product touted as having eCommerce connectivity and importing from multiple marketplaces.
Even if syncs were to occur in chronological sequence from a single eCommerce source, the next source would create new transactions in its own chronological sequence, which would then be out of chronological sequence within QBO.
(2) Wait at least 2 minutes between creating one QBO inventory transaction and another.
Commentary: What the heck? How could they possibly suggest a 2-minute wait time between entering transactions, even those involving the same item? It's totally ridiculous!
(3) Create QBO inventory transactions with fewer inventory line items.
Commentary: It's always a good plan... NOT! Let's increase complexity to try to reduce it. Add more transactions and increase the size of the database as a whole to break apart items that should be in a single transaction. Even if you did this, it wouldn't change the items being used; it is potentially just more transactions per item.
(4) User Non-inventory Items for Inventory
Commentary: Now, here is a game changer....... use non-inventory items to record inventory transactions being recorded in another system because non-inventory items in QBO do not use FIFO cost accounting.
And how exactly does that give us the current quantity and value of inventory within our accounting 'platform?'
(5) Reproduce the inventory item and start using it
Commentary: Create another inventory item for the same product in QBO and begin recording transactions to the new item rather than the old item.
And how exactly does that conform to FIFO cost accounting when our oldest costs would be in the 'previous item' and the new duplicate has no cost history before being set up afresh?
Of course, you can always just 'create a new QBO database' and start over. That probably only sounds familiar to QBO Administrators who previously administered a QB Desktop file.
Is Reality Setting In?
With the growing use of QBO and growing QBO clients, especially those with inventory requirements, it appears that QBO isn't really up to handling significant inventory demands on an item-by-item basis. Their cost engines are running at ramming speed yet reportedly dead in the water.
Rather than being a tool to improve efficiency, the opposite is true... slow down, don't process transactions as fast, wait between transactions, decrease the number of lines on a transaction, and then increase the number of transactions instead. Don't really track your inventory; use non-inventory to track it instead; and above all, be ready to pay for yet another company file when the one you have is too big in terms of item history. You must pay for the old and new files to have your entire company history available.
If this problem sounds like what you are encountering with QBO and the solutions posed sound as ridiculous to you as they do to me, my suggestion is to migrate from QBO to an alternative that is inventory-centric and bolstered to meet your true demands.
By the way, I will be hosting an Insightful Accountant 'Be Insightful' webinar on migrating to ERP alternatives early this fall, so stay tuned for more information.
Disclosures
1 - Business validation error while syncing transactions with inventory items; July 19, 2024, Intuit Developer Support Community.
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