I have attached a screen shot of my inventory on hand screen that has increased in value after the update. When I drilled down to see the increase, I noticed the freight in recorded for customs and clearance to a different supplier to the one that inventory is purchased from is now recorded as outstanding inventory. Whereas, we have sold out the entire quantity already.
I was only able to figure this discrepancy because we were out of stock for this item.
Please let me know if there is any change required in the method of input. I checked the guide and nothing has changed.
I assume the supplier is who charged you for customs and clearance so that’s how it should be.
The issue here is that you are adding cost to inventory after you have already sold out. Previous versions would simply move the balance to inventory expense account but new version no longer does that.
Anyway, this is only issue if you enter purchase invoice for customs and clearance after selling all your inventory items. You can always allocate these kind of expenses directly to some inventory cost expense account.
No @Lubos. The supplier is overseas and the forwarder is in house. So the local forwarder bills us separately after the goods come in. Hence, there are 2 invoices.
You are right with regards to adding the clearance invoice after the goods have been sold out. However, this is because invoice is received at a later date due to the credit terms and the sold out goods are delivered to the customer upon arrival.
I have followed the guide that states we need to create a new invoice and add freight in with the qty being zero against the amount billed. So does this change now? and does all the past entries that have a similar pattern need to be rechecked and amended?
No it doesn’t change. But there is an assumption that you are capitalizing costs for inventory which you have on hand. Capitalizing costs for inventory which you no longer have is an edge case I didn’t think of. And currently not sure what should be the right way for software to do.
When this situation happens, are the costs at least known to you at the time of sale to customer?
Yes, the sailing charge and duty charge is known to me in advance.
However, there are inspection charges that are only known at the time of clearance and there are other shipping line charges that are only billed to me after the goods arrive at port and documents are obtained from the shipping line.
OK, let me think this through. I’m not sure what would be the most elegant solution.
There is Inventory Profit Margin report which is clickable and the point of the report is to show how much profit you made per sale.
Now, these delayed freight in costs are complicating things a bit. I mean the easiest thing to do would be to just allocate it to the last sale if you are capitalizing costs for inventory item where quantity owned is zero.
Maybe I’m overthinking this and another solution would be to move freight in costs to expense account without it being linked with any sale.
Okay, I will revert back to the old version for now and wait for your final update/ solution forward to this and then update software again. Will keep a lookout for your response.
You don’t have to downgrade. Just recategorize the sales invoice of these freight in costs directly to inventory expense account. This is what previous version did for you (to fix this which wasn’t really a fix - more like hiding the issue).
Then why not revert to the previous version process, which didn’t cause any issues.
Revert to the previous version process, there is no need to re-invent the wheel.
Why, they weren’t complicating things before, that is, before the programme was changed.
No it is not, if the freight-in cost is for a 100 items and the last sale is for only one item then you are overloading that sale.
Yes, but if the costs weren’t known at the point of sale, you can’t retrospectively adjust. The Inventory Profit Margin report is reflecting Sales, it is not trying to reconcile the Inventory Sales with the Inventory COGS accounts.
Yes, to the over thinking. The previous process wasn’t broken, so still use the Inventory COGS account, why have a new (different) expense account just because the inventory is zero.
