As mentioned in the companion article “How do I use the Inventory/Stock Management System?” the system operates in conjunction with the Purchase Order Processing System and the Sales Order Processing system. Alternatively, you can operate this system without either or both of the Order systems and use it solely in conjunction with the Purchase Ledger and/or the Sales Ledger. In this latter case the Goods are received into Stock when a Purchase Item Invoice is processed and out of Stock when a Sales Item Invoice is processed.
In addition it’s important to note that the Inventory Management System operates in Base Currency only – mainly because Inventory is valued in based currency regardless of the Currency of the Supplier (Vendor) or Customer. You can still process Orders and Item Invoices from foreign currency Suppliers (Vendors) and sell to foreign currency Customers. Indeed you can purchase the same Product in several different Currencies from different Suppliers (Vendors) and process Sales in multiple Currencies as well. Prices and Costs in the system are maintained in Base Currency. When a Sales Order or Invoice is processed the Base Currency Price is converted to the Currency of the Customer and presented as the default Price. Similarly, when a Purchase Order or Invoice is processed, the Last Cost is presented in the Currency of the Supplier (Vendor) as the default.
This program in the Inventory Management System operates in conjunction with the facility for periodic Inventory Checks (“Stock Takes”) and caters for additional Inventory Item Adjustments (e.g. Write-Offs, etc.) other than those involved in the Stock Check itself - which mainly results in the adjustment of Inventory Levels. Refer to the Article entitled “How do I Carry out an Inventory Check or Stock Take” for more detail.
2. Moving Stock from one Location to another:
For this type of action, you must use the “Transfer” Adjustment Type. In this example, having chosen the Item Code as being GSHP, you want to move 25 Units from “Bin1” in the “Main Panel Stockroom” to the “BIN8” in the “Fixing Supplies Boxes” for “Lack of Space” reasons as highlighted above. After clicking on “Process” this is the result;
3. Inventory Returns to Suppliers (Vendors) or from Customers:
3.1 Returns of Goods to a Supplier (Vendor): If the Purchase Order has been fully processed and the Goods have been taken into your Inventory, then returns of Goods or Packaging Materials (Pallets, Containers, etc.) are carried out using the Purchasing System’s Debit Note facility. When you raise a Debit Note in the Purchasing System the Inventory System’s Quantity on Hand is immediately reduced by the quantity quoted in the Debit Note. However, the Supplier’s (Vendor's) Account is not updated until you “Post” the Debit Note transaction. Therefore, usual practice is to leave the Debit Note un-posted until such time as you receive the Supplier’s (Vendor's) Credit Note. If there are discrepancies between your Debit Note and the Supplier’s (Vendor's) Credit Note you can then recall the Debit Note for correction before Posting it. If the discrepancies involve quantity you can also amend this data at the time and the system will reverse the original Debit Note quantity as well as processing the new quantity;
Alternatively, you could make a Stock Adjustment (see 4. Below) immediately the physical Goods are returned and subsequently process a Batch Debit Note when the Suppliers (Vendor's) Credit Note is received, or, if you’re concerned about the delay in posting the accounts data, you could process and Post a Debit Note immediately thus updating both the Stock position and the Supplier’s Ledger there and then and subsequently deal with any Price differences or Disputes (e.g. Damages) using the system’s Journal facilities.
However, if the Purchase Order is still in process, you can use the facilities of the Purchase Order system to “Cancel” the Order. If it is un-delivered this will Cancel the full Order. However, if it is partially delivered this will only cancel the balance of the Order and you will then have to proceed as above if you are returning the delivered Items to the Supplier (Vendor).
N.B. In any event it important to take account of this type of transaction when carrying out an Inventory Check to ensure that Supplier (Vendor) Returns have been processed fully in order to ensure no miss-matches at the point of Stock Take.
3.2 Returns of Goods from a Customer: The system acts in exactly the same way for Return of Goods from a Customer - but, of course, in reverse. If the Items have been delivered out of your Inventory then you should use the Sales Credit Note facility to log the goods back into your Inventory - except, in this case you do not need to await further documentation and can “Post” the Credit Note immediately, thus updating the Inventory and the Customer’s Account at the same time.
Similarly, if the Customer’s Order hasn’t been fulfilled you can use the “Cancel Order” button in the Sales Order Processing suite to cancel the remainder of the Order and then proceed to Invoice that portion which has been delivered or take the partially delivered portion back into Inventory and issue a Credit Note if required.
4. Stock Adjustments - Write-Downs, Revaluations, etc.:
Breakages, Shrinkage, or other Inventory Write-Downs should be dealt with using the general Stock Adjustment facility and should be recorded as soon as they occur or are known about. It is not the job of the Inventory Count/Stock Take facility to record such Inventory adjustments since a Stock Take may not occur for quite some time subsequently. In addition, this generalised Stock Adjustment program also facilitates Inventory Write-Backs and Inventory Revaluations.
The “Adjustment Type” buttons (choose one only) allow you to specify which action you want to take and the behaviour of some of the other Parameters such as Location, Cost, etc. First though, you must provide a reference for the Transaction you are about to create in the “Adjustment Ref” field. If you specify an “On Hand”, “Reserved on SOs” (i.e. quantities set aside as a result of a Sales Order but which have not yet been delivered out) or “Reserved on POs” action, then you should also provide the correct Location and Sub-Location as well as the Adjustment Quantity. In the case of “On Hand” the Adjustment Quantity is, in this instance, a positive or negative value to be added to the existing value. So if you do not get the Location data correct you may well end up creating Stock in a new Location. In the case of “Reserved on SOs” or “Reserved on POs” it’s a replacement value. You can also supply a Reason for the Adjustment and it is strongly advised that you do so in order to aid any subsequent reconciliations that might arise. Each Adjustment will create a new Transaction in the Inventory Management system for that Item.
If you chose the Adjustment Type “Average Cost” then the Location fields are irrelevant and blanked out. Key in the new Average Cost in the “New Cost” field to revalue your Stock on Hand.
This causes a new memorandum transaction to be created in the system for that Item as shown above and the Average Cost Price on the ItemMaster record is set to the New Average Cost. The relevant General Ledger Postings accounting for the Stock Adjustments or the new Average Cost are also posted to the General Ledger Stock Control Account and the Stock Movements Account.