QuickBooks has several useful tools, including a feature which allows users to track the quantity of inventory on hand. However, one common problem users run into with this feature is an inventory value going negative.
Negative inventory is caused when sales transactions are entered before the corresponding purchase transactions are entered and the results can be a real headache.
Potential issues include incorrect cost of goods sold balances, errors on vendor reports, and “out of balance” balance sheets. If any of these issues sound familiar, now is the time to learn more about how you can fix or avoid negative inventory altogether.
Fixing negative inventory
If you find yourself with a negative inventory situation, don’t panic. Use the following tips to help correct it.
- Edit dates: If it reflects the flow of your products, you can adjust transaction dates so that vendor bills are dated before customer invoices.
- Select reports > inventory > inventory valuation detail.
- Change the report to show all dates.
- Look through the report for items showing a negative amount in the on-hand.
- Adjust the dates so that the bill dates are before the invoice dates.
- Repeat this process for each item with a negative quantity in the on-hand.
While trying to correct negative inventory, take necessary precautions to avoid potential problems. For example, back up your data and keep it safe. Understand that you must eliminate each occurrence separately. There is no way to shortcut this remedy. Before you do anything, touch base with your accountant to confirm that the changes you are making are valid.
Avoid negative inventory
You can avoid this situation by only recording the sale of inventory items after you have purchased them and entered the purchases into QuickBooks.
The following guidelines can help with this process:
·Set up inventory items with an opening balance – When creating a new inventory item, you can enter the quantity on hand and value to establish the average cost. If there are no units on hand, enter a purchase before entering the sale.
·Use non-posting estimates and sales orders to track sales for which you do have inventory – First, enter the customer order as an estimate or sales order. Next, purchase the inventory item and enter the purchase into QuickBooks. Lastly, convert the estimate or sales order to an invoice.
·Use pending invoices to enter sales for which you do have inventory – First, enter the customer order as an invoice and then mark the invoice as pending. Second, purchase the inventory items and enter the purchase into QuickBooks. Next, mark the invoice as final. Finally, adjust the invoice date to the date on which the goods are shipped to the customer.
·Set preferences to warn you of potential problems – Under Edit > Preferences > Items & Inventory > Company Preferences, you’ll find a check box to “Warn if not enough inventory to sell.” Make sure this preference is checked to receive pop-up warnings if you’re trying to invoice a customer for more units than you have available to sell.
How to find if your file has Negative Inventory
Inventory Valuation Detail (IVD) report
The Inventory Valuation Detail Report is the ONLY report that you can use to check if your data file has negative inventory. Negative inventory shows with negative numbers in the Quantity on Hand (QOH) column.
How to run the IVD?
- Go to the Reports menu.
- Select Inventory then click Inventory Valuation.
E-Tech offers a repair service to fix all instances of negative inventory in the file. The service will analyze your source data file to identify the items and dates the quantity on hand (QOH) went negative and then fix all occurrences of negative inventory. The repaired file will not have negative inventory and will verify correctly in QuickBooks.