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Negative Inventory Issues In QuickBooks Desktop

Negative Inventory: How to have Your Stock Back in to the Positive

Many manufacturers might tell you that negative inventory is a challenge that is going to occur enough times you may possibly as well embrace it. However, the unfortunate truth is that it's a sign of bad management. That’s why we’ve looked into negative inventory, just how to identify it and remove it from your own processes.

Entrepreneurs have a great deal on their plate when it comes to managing their business.     

Visit: https://www.proaccountingxpert.com/negative-inventory-issues-in-quickbooks-desktop/

And the number of work a business owner needs to do increases once they decide to implement a D2C manufacturing business design into their company.     

D2C manufacturers, aside from company size, will have to manage their administration, finances, resources, production operations, sales, and supply chain management.     

With so many processes to follow along with, a manufacturer can’t afford to make any mistakes and risk errors happening while also trying to meet their production and sales deadlines.     

This pressure to fulfill deadlines can result in mistakes, such as going into negative inventory.   

This (bad) practice happens to be accepted by plenty of manufacturers as an unavoidable issue that should be corrected after the problem occurs, rather than stopping it before it happens.    

However, the longer you put off coping with your negative inventory problems, the longer you’re likely to be making business decisions according to incorrect information.   

Negative inventory left unchecked will lead to issues varying in severity, from a small inconvenience to a production stopping problem for your business.

One of the reasons many manufacturers elect to cope with these issues once they arise is a result of the problem of trying to determine what type of negative inventory your organization is carrying.   

But, do not have fear! We’ve looked at the difficulty of negative inventory and put together a write-up exactly how you can easily identify and address your negative inventory.   

Also Read: https://accountingspro.usite.pro/blog/negative_inventory_issues_in_quickbooks_desktop/2020-12-04-166

Negative inventory (sometimes described as ghost inventory) is when a manufacturer's inventory count implies that inventory is below zero.

The reason why your inventory has dropped below zero we will explore later when you look at the article since there might be several reasons as to the reasons the truth is negative stock. 

Regardless of the reason your inventory has negative stock, it’s a tremendously common issue when you look at the manufacturing industry, plus some companies make use of it as a genuine business practice.  

However, by embracing negative stock, you’re in danger of creating bigger problems for your business, mostly as you'll be making unnecessary decisions, such as for example ordering more materials or starting production, as a result of the faulty information.

Ultimately, negative inventory is an indication of poor management with regards to processing sales and manufacturing orders, much less a part and parcel occurrence that manufacturers need to face.  

And when you keep up to permit the negative stock to generate in your inventory, you will definitely often be risking:   

— Selling items to customers without stock in-store;  

— Selling items to customers without stock online;    

— Performing a stock transfer with insufficient stock; and   

— Ordering more materials despite the fact that some materials are usually in production.    

You most likely have the gist of this issues right now.  

But, knowing the issues is one thing. The ultimate way to avoid negative inventory is to be pro-active and identify why is negative stock occur.  


So how exactly does Negative Inventory Occur? 

Now you know all about what exactly is negative inventory, the next phase is identifying where the negative stock comes from.  

Negative inventory can occur as a result of:  

Timing 

That is probably the most common occurrence when looking at what exactly is negative inventory. An example of a timing issue might be that a customer places an order for a product that is out of stock, however you go on and mark your order as shipped because you understand that production for the product would be all in all soon.   

This issue is probably the easiest to fix because once production is complete, you could make the necessary inventory adjustments.


Production           

During manufacturing, you need to account fully for byproducts, scrap amounts, production statistics, and batch tracking. Misunderstanding your manufacturing orders or accidentally creating a duplicate can cause manufacturing either not enough or too many products.


Inventory at Multiple Locations   

This can occur when dispatching products into the wrong warehouse or recording a sale through the wrong store. This negative inventory issue is scary because if you save the stock transfer wrong, it may look like warehouse A is missing 200 items, while warehouse B has 200 more items than it requires.    


Item-Level Negative Stock       

Backflushing, the process of generating and completing a manufacturing order (MO) after a batch production has finished so you can improve your current inventory levels. Alternatively, an item-level negative stock might appear if there’s a product that you want to make to order (MTO) only once the demand is there.  

So, now you discover how negative inventory occurs, now you have to know about how to correct these mistakes and regain control over your inventory. 


Just how to fix Negative Inventory

It may seem like correcting negative inventory is a complex process, considering how easily negative stock could form.   

However, we’re happy to offer you some comfort by letting you understand that correcting negative inventory is pretty straight forward. Especially when you know what you’re interested in.   

All you need to do is to go into your inventory management systems reports and locate which products or materials are displaying stock levels below zero.   

From here, you are able to investigate your recent transactions to determine what resulted in the negative inventory appearing, and what sort of negative inventory it is.   

However, the corrections you’ll make will all be dependent from the type of negative inventory you’ve recorded:  

Time – When correcting, such as marking an item as shipped before production has finished, it is important not to overstate your amount and don't forget that missing inventory continues to be in your stock. 

Location – in the event that you made a mistake while recording a stock transfer, such as inputting the incorrect values, the inventory could be in the correct location, it simply should be taken into account accordingly. 

Item-Level Negative Stock – this might be a serious one because it could indicate that there’s a challenge with your manufacturing process. You’ll need to identify why your products or materials are arriving in as negative stock during production.  

But we understand why is still pretty vague, and we can’t get into specifics since manufacturers use many different types of inventory management software.  

Although, the video below should give you an improved comprehension of ways to fix your negative inventory:  

However, to help you know how you may be able to fix negative inventory, we’ll have a look at how to fix negative inventory in QuickBooks Online as plenty of manufacturers use QuickBooks for manufacturing.  

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