Definition
A SKU, or stock keeping unit, is a code a business assigns to each distinct product or service it sells so it can track inventory, pricing, and sales. Each variation, such as size or color, gets its own SKU. SKUs often appear on quotes, purchase orders, packing slips, and invoices next to each line item.
Also called: Stock keeping unit, Item code, Product code
SKU in practice
SKUs are internal. Two businesses selling the same product will usually use different SKUs, unlike a UPC or EAN barcode, which is the same for that product everywhere. Many businesses build SKUs from readable parts, such as TSH-BLU-M for a medium blue T-shirt.
Putting SKUs on invoices speeds up order matching for clients with large catalogs and helps your own team reconcile what was sold against stock levels.
Service businesses can use SKUs too, for standard packages such as a one-hour consultation or a monthly maintenance plan, which keeps pricing consistent across invoices.
Example
A candle maker uses the SKU CND-LAV-12 for a 12 oz lavender candle. A wholesale invoice lists "CND-LAV-12, Lavender candle 12 oz, 48 units at $9.50".
Frequently Asked Questions
What is the difference between a SKU and a UPC?
A SKU is an internal code you create for your own tracking. A UPC is a standardized barcode number issued through GS1 and shared by every retailer selling that product.
Do I need SKUs if I sell services?
Not necessarily, but short codes for standard services make your product catalog easier to manage and your invoices more consistent.
Related terms
- Product and service catalog A product and service catalog is a saved list of the items a business sells, each with a standard description, unit price, and tax treatment, used to add line items to invoices and estimates quickly and consistently.
- Line item A line item is a single row on an invoice that describes one product or service, with its quantity, unit price, and line total.
- Unit price The unit price is the price charged for one unit of a product or service on an invoice line, such as the hourly rate, price per item, or daily fee.
- Packing slip A packing slip is a document included in a shipment that lists the items and quantities inside the package.
- Unit of measure A unit of measure is the unit in which a line item's quantity is counted and priced, such as hours, days, pieces, boxes, square feet, kilograms, or miles.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.