Negative inventory occurs when there is a discrepancy between the amount of inventory recorded in the system and the actual quantity on hand. This can happen due to several reasons, such as inaccurate record-keeping or unexpected sales. When inventory goes negative, it can cause several issues for the business, including:
Decreased Customer Satisfaction:
When inventory goes negative, it can lead to backorders, delayed shipments, and unfulfilled orders, which can result in decreased customer satisfaction and loss of business.
Increased Costs:
Negative inventory can also result in increased costs, as the business may have to expedite shipping or production to meet the demand, which can be costly.
Inaccurate Financial Statements:
Negative inventory can also lead to inaccurate financial statements, as the cost of goods sold (COGS) and inventory valuation may be incorrect, leading to potential tax issues and audit problems.
To avoid these issues you can use these features from NetSuite that come out of the box:
Enhanced Validations and Defaulting Bundle:
- This is a free bundle provided by NetSuite that allows validating the available inventory in NetSuite at each location.
- This bundle will also restrict the outbound of any product if the inventory count in NetSuite goes negative.
- With this bundle, you can monitor your inventory accurately in NetSuite and record any missing inbound Inventory transactions.
Inventory Alerts:
- You can enable an inventory level warning in your account. This will send alerts to the users when creating outbound transactions if you do not have the available inventory.
- This will help in identifying inventory below reorder point or not available on sales transactions and will make it easier for the sales team to communicate with the customer.
Fulfillment criteria:
- Under accounting preferences, you have the option to define the fulfillment criteria.
- This criteria defines when an order can be fulfilled. It has three options: Limit to Committed, Allow Uncommitted, Ignore Commitment
- Using ‘Limit to Commitment” option restricts orders from creating fulfilments for the items which are committed and not back-ordered.
Review Negative Inventory:
- NetSuite out of the box provides a “Review Negative Inventory” report which provides the list of Inventory which are in negative for each location.
By using all of the mentioned preferences, you should be able to manage inventory counts in NetSuite and stop the phenomenon of negative inventory in your system. Accurate inventory management can help you avoid stockouts, overselling, and other inventory-related problems that can hurt your business. Make sure to take advantage of all of the inventory management features and bundles that NetSuite provides to ensure that you have the most accurate inventory count possible.