As I’ve previously mentioned, a wealth of information has been revealed from the ProAdvisor Awards Applications. And 2024 is one of the wealthiest in terms of data due to new questions and new ways we collected question answers.
In the application section where ProAdvisors with a practice consisting of 45% (or greater) clients using QuickBooks Enterprise, we measured numerous Enterprise features supported by our Pros. The question is centered on the percentage of clients using each of 33 features exclusive to Enterprise (at multiple product SKU versions).
Insightful Accountant ranked each feature simply by multiplying the feature scores by 3.03 to build a zero (0) to one-hundred (100) ranking. The lower the ranking, the lower the feature scored in terms of client use. The higher the ranking, the higher the feature scored in terms of client use.
I will discuss various features over the coming weeks, and while you might think that I would start with the ‘highest ranked,’ that’s not the case. I will randomly be presenting features in no particular ranking order.
I will also be preparing a ‘white paper’ regarding these thirty-three features and their relative rankings, along with issues that may reflect their positive qualities rather than negative ones. Insightful Accountant will inform you when that ‘white paper’ becomes available via our portal.
But for today, I’m back to the topic of FIFO Inventory.
This past January, well before I began looking at the Top 100 Application data, I wrote an article titled Watch Out when Changing from Average Cost to FIFO. I mentioned that many users thought changing from Average Cost to FIFO was as simple as selecting a preference or migrating to a different product. I also explained why that wasn’t true and that they could likely see a ‘big difference’ in their financials.
Well, as it turns out, FIFO was reported by our Top 100 ProAdvisors as one of the ‘least used’ exclusive features found in QuickBooks Enterprise. Even though it is available to Enterprise Users with ‘Advanced Inventory,’ the vast majority remain on Average Cost based on what our Top 100 ProAdvisors tell us regarding their clients.
With a ranking of only 14 out of 100, it can be interpreted that almost nobody using QuickBooks Enterprise is interested in transitioning to FIFO inventory costing. They apparently don’t want to change their long-standing history of reporting inventory at average cost on their tax returns, or they would have changed already.
Perhaps many dread going through the ‘legal process’ of changing the value of their inventory reporting as required by the Internal Revenue Code and potentially risk an audit. Of course, reporting the change would be required if they either chose to change to FIFO within Enterprise or migrated to QuickBooks Online, which presently only supports the FIFO inventory method.
For many users there is a good reason not to change to FIFO.
Typically, a change in inventory reporting from Average Cost to FIFO means higher taxes, at least for the year of the change, if not the long haul. To quote Intuit, “For most businesses, FIFO shows the biggest gross profit and highest final inventory value on the balance sheet1.” They meant to say, ‘FIFO shows the biggest net income on the Income Statement and highest period-end inventory value on the Balance Sheet…’ because the Balance Sheet displays Net Income (not Gross Profit).
So, while many MLBs may worry about the cost and hardship of migrating from Enterprise to QBO, the actual cost related to the transition may not be nearly as ‘costly’ as the inflated tax bill payable to the U.S. Treasury at year’s end, (and maybe state or local officials for 'business personal property' taxes) resulting from the inventory valuation change, especially if a business is heavily weighted in inventory for manufacturing, wholesale or retail operations.
With the changes in availability of QuickBooks Desktop Pro and Premier as of the end of July 2024, who can say what will come of Desktop Enterprise in the next few years?
But just suppose Enterprise is on its way to oblivion sometime relatively soon.
In that case, we can only hope Intuit recognizes that Enterprise users will likely be looking for a Non-Intuit solution that offers an ‘Average Cost’ inventory method. Or alternatively, Intuit offers a migratory path where the ‘Average Cost’ inventory method is an option within QuickBooks Online Plus and Advanced.
Footnotes & Disclosures
1 – Move your inventory from QuickBooks Desktop to QuickBooks Online by QuickBooks, January 26, 2024 (last update), QuickBooksHelp (in product and online Help).
Some feature content was adapted from Intuit source content and other QuickBooks resources including QuickBooks Help information (both in-product and on-line). Content adapted by Insightful Accountant from Intuit sources is furnished for educational purposes only.
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