About half a dozen times a year, I’m asked the question: “Does your inventory management and accounting software handle negative inventory?” The answer is no, and in my opinion no software should allow this.
Now, if you can take me into your warehouse and show me what negative inventory physically looks like, I might change my mind. But of course there is no such thing. (In this case I’m referring solely to item level negative inventory, as opposed to location level, a different story.)
We’ve all heard the reasons:
– We have to ship out before we have time to receive the incoming PO in the system
– We need to invoice the customer what we ship, even if our inventory system says out of stock (common POS issue in retail environment)
– We can always catch up data entry later and all will be correct at that point (actually no, it won’t)
The reality is that I’ve not yet encountered a single business who’s perceived need to handle negative inventory could not be superseded by a properly implemented set of business processes.
If you don’t have time to receive an inbound purchase order into your ERP Software before shipping out to a customer, and you need a physical invoice document to accompany the shipment, realize that the invoice is just a piece of paper. A modern system can generate a document that looks like an invoice without actually posting that invoice through the system. Then later (day-end perhaps) you can process the PO receipts for the day and post all invoices.
Similarly, in a retail environment, you can sell products through the POS, but be required to account for inventory in and eliminate any negative quantities before running day-end or shift-end processes and cashing up.
Check back in a week or so for some of the negative consequences of negative inventory.