Inventory Profit margin

I am showing some discrepancies in the Inventory Profit margin. The items are showing only their sale value, even though I have both a sales invoice and a purchase Invoice for the same.

Steps I performed are as follows:

  1. Created an Inventory Item “QNAP”

  1. Created a Purchase invoice for the item “QNAP”. This is in currency AED.

  1. This amount is spent from my bank account to pay supplier

  1. Created a Sales invoice for “QNAP”. This is in USD

  1. Received Payment in my Bank Account from Customer.

  1. Now this is where the problem arises: When I check the Inventory Profit margin, only Sale value shows, and not the purchase value - so it shows as 100% margin, while it clearly is not.

If you notice, I am facing same issue with several transactions which are showing up with no purchase value.

Can you please help?

The problem is that you have sold the item on 11th of August but purchased the item on 7th of September. In other words you have made purchase only after making a sale.

This is a problem because at the time you’ve made the sale, the item wasn’t purchased yet, therefore purchase price was not known. That’s why you see profit margin 100%.

Usually businesses would hold many items and re-purchase when stock gets low so this situation would never occur.

Regardless of the above, I’m planning to improve inventory to handle even these edge-cases just for the sake of completeness. However if you don’t hold any inventory and simply purchase items from supplier only after you make the sale (seems to be the case here), I wouldn’t use inventory module at all since you don’t really maintain an inventory on hand.

That explains so much. Thanks a ton!

You are right, in my business model, I don’t normally hold inventory and purchase only after the sale is made. I sometimes even end up invoicing the customer before I purchase the items. Those are the particular cases that seem to be throwing up the errors.

I still prefer to use the inventory module however, because I need the Part Numbers displayed on quotes, purchase orders and invoices, and I seem to be getting these only when they are in existing inventory. Besides, when they are in the inventory, I can use the Inventory Profit Margin report that helps me understand and analyze the margins and percentages I make.

So I guess for the time being (until you work out something for this), I think I can manage to play with the purchase dates and have them before the Sale.

Thanks again, though. Your explanation really brought things to light

I definitely wouldn’t be modifying dates just to accommodate for some subsidiary report. Accounting records should reflect the reality. It’s just that currently Manager doesn’t handle this particular edge-case but it soon will.

i have read the above query and have the same problem
please advise if an invoice has already been created for an item and then you create a purchase invoice dated before the date of the invoice will the report then pick up the cost of that item ?
Les Davis

@lesd, which version are you using? It’s possible this issue has been resolved. There have been a lot of improvements to inventory lately.

Thanks for quick reply
I am using version 16.3.5
When one creates a purchase invoice under account do you put it under inventory on hand?

Try the latest version because this issue might have been fixed in 16.3.10 version.

Yes.

Hi Lubos, just see this Profit Margin results for inventory items. Is it also possible to get this kind of report/overview when i dont use inventory items??

thanks, Dietmar

No, because profit margin report is based on how much sold items have been purchased for. Non-inventory items are not tracked this way.

hi,
I have dowmloaded version 16.3.37
Also please advise
When one creates a purchase invoice under account do you put it under inventory on hand?
thanks

@lesd Yes you are correct, select Inventory on hand account.
See http://guides.manager.io/businesses/inventory-items/purchasing-inventory
Have a read through all the sections in the guides, they great for getting started.