How to Fix Negative Inventory Issues

In this article, you will learn about the possible cause and how to fix negative inventory issues.

In our article direct sales inventory management, we showed you an easy three-step process for managing your inventory. One thing that can happen which we try our best not to allow in the application that leads to negative inventory values is adding an invoice to remove products from inventory before entering a purchase order (PO) to add them into inventory. You cannot sell something you don't have in inventory, right?

Why is negative inventory a problem?

Well simple. If you invoice a product before it has been added to inventory with a purchase order, Direct Sidekick does not have the actual costs for the product when adding the transaction to cost of goods sold (COGS).

This leads to an incorrect cost of goods sold amount which then leads to overstating your income and paying more in taxes.

We definitely do not want that to happen!

Direct Sidekick always checks for negative inventory when you view your Profit and Loss report. If we find negative inventory, we will prompt you with a notice alerting you to the issue and directing you to fix it.

How to fix negative inventory issues

The fix is easy! If you notice or are notified of negative inventory, complete the following steps to fix it:

1. Navigate to your Stock on Hand report.
2. Click the sorting arrows in the “In Stock” column to sort in descending order. This will show the items with negative amounts on hand at the top.
3. In a new browser tab, navigate to your product list.
4. Enter the product name or item number in the Search box to find the product with negative inventory.
5. Click on the product name, then the transactions tab. This will show you the purchases and transactions for this product. You will be able to see the order of transactions as well as quantities in and out. Since you have a negative amount of inventory for this product, you are more than likely missing a purchase order here.
6. Navigate to purchases under the inventory menu.
7. Click the new purchases button and enter the missing purchase order.
8. Now the negative inventory issue for this product is fixed!

How to prevent negative inventory issues:

Follow the steps outlined in the direct sales inventory management article.

1. Enter your purchase orders BEFORE adding invoices or adjustments.
2. Add invoices and adjustments to remove products that are already in inventory.
3. Check your profit and Loss Report periodically. Set a monthly reminder to check for alerts about negative inventory and uncategorized transactions.