Learn About Negative Inventory And How To Manage It

It may seem absurd to have a negative inventory, but this is not such an uncommon situation.

It basically means that your promised inventory levels are higher than what you already own in your stock. So, you cannot honor the corresponding orders quite yet. Of course, you should be cautious with this, because a negative number might be caused by some deep-rooted problems. However, with the right inventory management software, you can certainly avoid some harsh consequences.

What are the most common causes of negative inventory?

The first step any person should take is to look at the data and check for any inconsistencies that might be related to this issue. It often happens to be just a matter of timing. You might have ordered some products that have to be delivered to the client immediately after they arrive. 

Another case could be related to production, as it’s such a complex process. A mistake caused by a duplicate transaction or an invoice misunderstanding could indicate that more units should have been produced. This creates a negative balance that needs to be tackled.

Sometimes, inadequate inventory records lead to negative inventory. Some cases include registering products from the wrong warehouses, entering data improperly, and miscalculations. These need to be identified from early on. Otherwise, they might create a snowball effect and disrupt other processes.

How this problem could affect your business

Customers might place orders for items that you no longer have in stock. Because you cannot fulfill those until inventory items are filled again, that can cause delays and the customers will receive their orders much later than they should have. This might deteriorate your relationship with the customers and they could stop considering your company when making the next purchase.

A negative inventory balance can also cause overstocking, because even though the products that you need are physically in your possession, you might not be aware of that. This can lead to ordering unnecessary stock that takes up valuable warehouse space. And not to mention the disruption in cash flow.

If remained unsolved, negative inventory has the potential of disrupting the entire workflow. Unfulfilled orders, delayed processes, and increased expenditures are just some of the consequences that can take place.

Thus, Megaventory has put in place some solutions that can help prevent any disorders.

How you can manage negative inventory with Megaventory

First of all, when looking at the Inventory Management section, you can check the detailed inventory, and notice any negative values displayed as On-Hand Inventory.

Then, when trying to sell products with insufficient stock, the user receives a special alert, as shown in the picture below:

An inventory system like Megaventory can also offer very detailed traceability features so that mishandling can be addressed early on. Quantity Tracking is available by accessing the Reports menu:

Also, if logged in as the admin, the user can check the Activity Logs from the Settings menu. This can help troubleshoot who made any mistakes or mishandling in order to prevent this from happening again.

Last but not least, Megaventory allows you to use barcode scanning for imputing information so that instances of human error can be reduced.

To conclude, the situation of negative inventory should not be perceived as a crisis, as there are many ways to deal with it accordingly. However, you need to locate where the problem stems from and find a suitable solution for each case. 

Luckily, Megaventory offers many ways in which you can fix negative inventory issues so that harmful outcomes can be avoided.

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