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 why companies want to track negative inventory:
- We have to ship out before we have time to receive the incoming purchase order (PO) in the system
- We need to invoice the customer what we ship, even if our inventory system says out of stock (this is a common POS issue in a 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is that I’ve not yet encountered a single business who’s perceived need to handle negative inventory could not be superseded by a properly implemented set of business processes.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.
As you can see, with the right inventory and accounting ERP software and internal business processes, there is no need to track negative inventory. In fact, eliminating negative inventory from your business processes can help you better manage inventory, reduce the amount of manual data entry and eliminate mistakes associated with forgetting to enter information or trying to create workarounds for dealing with customer orders.