This article explains the process to hold stock in your warehouse on consignment from your supplier. This covers the receipting, sales and payment to your supplier.
Holding Stock on Consignment
To effectively manage stock provided on consignment by your suppliers, it is essential to accurately track and account for these items.
This process involves receiving the stock from the supplier without an invoice, monitoring the quantity and value of the stock on hand, and keeping track of the sales of these consignment items. By implementing proper tracking and accounting procedures, you can ensure transparency and efficiency in managing consignment stock within your inventory management system.
The Setup
For the purposes of tracking this stock you should set up a few items first:
- Create a new stock location:
- Note: If you have the same item on consignment and also in general stock there is a chance the cost may vary. In this case you should tick the box to “cost separately” for the consignment location. This will ensure the stock here is kept separate to the general average cost.
- Next you should create a GL code for “Stock Held on Consignment”. This would be a balance sheet account normally but you should consult with your accountant for clarification.
- Create a reason code for the receipt linked to the new GL Code
The Solution
Receipting Stock
When you receive stock on consignment you would process this as follows:
- Go to Inventory > Receipts > Create a receipt for the stock, ensuring to select the correct location and reason code.
- Save and Release to record the transaction.
- This will record the stock into the consignment location available for sales. The transaction will have the following financial affect:
Selling the Items
The consignment items can be sold or used as normal through sales transactions. To use the stock from this location simply select the consignment location on the relevant transaction. For Example on a sales order shipment:
Paying the Supplier
When you sell the goods, you will need to pay the supplier for these and record an invoice. This should be done as follows:
- Go to Payables > New Bill
- Prepare the invoice header as normal selecting the supplier and adding the invoice number and date, etc.
- In the body of the invoice record a line against the Stock Held on Consignment GL Code
- The amount should be the value of the goods you need to pay for (based on sales or as agreed).
- The invoice will have the following affect
- CR Trade Creditors
- DR Stock Held on Consignment
- DR GST Paid (if applicable)
- The above transaction will clear the value in the account as the goods are paid for.