Negative stock | How to fix and monitor

Why do negative stock/inventory occur?

You are entering a sales transaction for items that you have not received yet.

There are a lot of other reasons why this might happen.

Why negative inventory is bad for your business?

Incorrect financial statements and erroneous stock value reports.

These are the problems if you have negative inventory quantities:

Income Statement/Profit and Lost - Cost of Sales/ Cost of Goods Sold amount is incorrect.

Balance sheet out of balance.

Balance sheet inventory amount incorrect.

Creditor reports contain errors.

Goods received vouchers or Supplier invoices showing up on income and expense reports.

How do you fix negative inventory?

First of all, do not sell into negative, it is recommended that you block the users from selling into negative.

If the stock did not arrive at the store, rather make use of purchase and sales orders to monitor when you receive and sell the stock.

Create a separate cost of sales adjustment or variance ledger account.

This will make it easier to distinguish between negative cost of sales adjustments and your cost of sales accounts on the income statement.

For all the stock major departments in the system set the cost of sales adjustment account to the new account created.

Miscellaneous/buy out items can also cause of problems, because there is no fixed cost linked to it.

It is recommended to create a non-stock item and linked it to periodic posting method; this will only record the sales and purchases on the income statement. 

There should also be no negative items on your stock file, it is advisable to correct the negative stock items with either the stock adjustments or using the stock take module to set multiple items correct in bulk.

Once this is done, generate a stock holding or stock value as at date report.

Use the figure on the report and post the relevant journals entries to your stock and cost of sales ledger accounts.

Also note that you need to balance your stock holding report to match your stock ledger account, in short, the two must balance.

Monitoring and mitigation:

Once you have corrected your negative stock it is important to monitor the process. 

We have a compliment of reports that we have tried and tested at various retailers. 

Complimented by the IQ Automation tool within the IQ system; we can assist you to manage the process so that you can focus on business and other operating activities. 

Please feel to contact us on:

Contact us 0213005776 | or email us support@implement.co.za