Updated: Jun 18
What is negative inventory?
Negative inventory is a condition that inventory count shows that there are less than zero item in stock. This is a common temporary inventory condition that occurs because inventory is closely tracked using computer systems, different accounting methods, etc. mistakes in the process can actually cause a negative inventory balance.
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What does it mean to have negative inventory?
Prevent Negative Inventory
Correcting negative inventory can be as simple as waiting for a brief period to see if it self corrects. In contrast, people will have to investigate how the problem cropped up. It is undeniable that “Prevention is better than cure” because serious mistakes can't be completely eliminated while people can substantially reduce their occurrence through a handful of tips bellow.
Hire qualified manager
Almost every company potentially has hundreds of thousands of dollars tied up in inventory. Thus, hiring professional and trustworthy people having a solid background with inventory is actually important.
Emphasize training from the start
The training is usually customized for each company, and workers should be learning best practices from the very beginning. Moreover, many vendors offering inventory management software and solutions will conduct on-site training for your employees. Jump on this opportunity!
Track order accuracy rates carefully
If you can’t recite your accuracy numbers for any recent interval, you aren’t keeping track well. Some easy things to track are returns, customer complaints, and inventory comparisons.
Perform cycle count
Cycle counting is the process of counting a small, predetermined set of goods, and materials frequently rather than performing a full physical inventory once per year. This is an important part of internal control procedures. Effective cycle counting requires counting a certain number of SKUs each day, and each SKU is counted at a prescribed frequency.
Select right software
Use leading inventory, order management and manufacturing solution, like Quickbooks, etc. to track inventory effectively. QuickBooks Enterprise has a great preference to prevent negative inventory. For example, people can set up software to keep negative inventory from happening, or run a stock status report periodically to identify negative on-hand quantity and to quickly discover SKUs with negative inventory.
Here are some detailed illustrations to prevent inventory by using Quickbooks Enterprise.
To turn on the preference:
Go to “Edit/ Preferences/ Items and Inventory” on the menu bar
Check the “Warn if not enough inventory to sell” check-box
Choose “Don’t allow negative quantities”
In addition to blocking items that may go negative, turn on the block by site preference (if Advanced Inventory available):
Choose “Edit/ Preferences/ Items and Inventory”
Click “Advanced Inventory Settings”
Select the “Multiple Inventory Sites is enabled” check-box
Select “Warn or block per site if not enough inventory to sell”
If company has inventory file, the pop-up box to the right will appear. This is because Advanced Inventory must put existing inventory into a single site, then you can move the inventory to the appropriate locations later on.
To find out negative quantity items
Intuit has provided a new Negative Item Listing Report to enable users to see which items currently have negative quantities. This report shows all inventory items and inventory assemblies with negative quantities. To run the Negative Item Listing report, choose “Reports/ Inventory/ Negative Item Listing”. Once knowing the items with negative quantities, you can create transactions or make inventory adjustments to raise the quantities back to positive levels.
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