Negative Stock Issue

Is “Allow Negative Stock” issue that discussed here :
Perpetual Inventory Not Working If We Allow Negative Stock - ERPNext - Frappe Forum

has any update?

I agree with jof2jc opinion since this negative stock is needed for certain cases and if there is no posting on accounting side, so it will have difference between accounting number and stock number forever.

Hi @oscarutomo,

We just share about the effect in accounting and stock, if enable the negative stock.

Enabling Negative Stock can have a significant impact on both accounting and stock management. Here are some of the effects:

  1. Accounting: Enabling Negative Stock allows users to create documents like Purchase Orders, Sales Orders, and Delivery Notes even when the stock quantity is below zero. However, it may result in an incorrect valuation of inventory and cause issues in financial reporting. For example, if a company sells a product with a negative stock quantity, the cost of goods sold (COGS) will be calculated based on the average cost of the item, which may not reflect the actual cost. This can result in incorrect profit and loss calculations and may have a negative impact on financial statements.
  2. Stock Management: Enabling Negative Stock allows users to create transactions even if the stock quantity is below zero. However, it may result in stock discrepancies and require additional effort to correct the inventory levels. For example, if a company sells more units of an item than what is available in stock, it will create a negative stock situation. This may cause confusion and result in delays in fulfilling customer orders. The company must take corrective action to bring the inventory levels back to positive, such as creating a Purchase Receipt or Stock Entry to receive or adjust the stock quantity.

In summary, enabling Negative Stock can have a significant impact on accounting and stock management. It can lead to incorrect inventory valuations, affect financial reporting, and create stock discrepancies. Therefore, it is essential to weigh the benefits and risks before enabling Negative Stock and take corrective action promptly to avoid negative consequences.

Hope you understand.

Thank You!

Hi @NCP , thanks for your reply.

I understand and aware of your points, but in the field, my customer want it to be allowed the negative stock. Here what actually my customer facing.
They are retailer that selling clothes and shoes. They have 2 outlets where located quite nearby. Often, when their customer looking for a shoes, lets say size 40. In the Outlet A, they don’t have the size. but when checking in the Outlet B, it has shoes size 40. So, they ask their shop assistant to “run” and take from Outlet B to Outlet A.

And since the situation is so crowded, lets say in the Ramadhan day. they are not willing to do Stock Transfer but they do the sales first. So in this situation, our system detected that Outlet A stock is negative. because no Stock Transfer made yet and in the reality, they have the stock already.

this is for simplify, in fact, sometime they have many items and not as simple as 1 qty of shoes.

Can you help me how to handle that? Thanks in advance

Hi @oscarutomo,

We have a little bit of knowledge of stock. so …

Allowing negative stock in ERPNext is not recommended as it can cause inventory discrepancies and potential loss of sales. However, in certain situations, such as the one you described, it may be necessary to enable negative stock.

If allow negative stock:

Set up a separate account for tracking negative inventory, such as an “Inventory Adjustment” account.

When the salesperson sells an item that is not in stock, they can create a sales order and then create a delivery note with a negative stock quantity to account for the items that are being transferred from another outlet.

When the items arrive from the other outlet, a stock transfer can be created to update the inventory levels.

To reconcile the negative stock, an inventory adjustment can be made to update the inventory levels and the negative stock account.

It’s important to note that allowing negative stock should only be used in exceptional circumstances and should not become a regular practice. It’s essential to ensure that inventory levels are accurate and up-to-date to prevent any potential issues with stockouts or overstocking.

Thank You!

“create a delivery note with a negative stock quantity”

does it mean like this:

because it is give another error :