How do I Use the Inventory/Stock Management System?

Transcription

1 1/11 How do I Use the Inventory/Stock Management System? 1. Introduction. 2. Code Management. 3. Setting up the Product Item Catalogue. 4. Managing Prices and Price Lists. 5. Bulk Price Update. 6. Appendix A. 1. Introduction: The Inventory/Stock Management facilities in this system operate fully in conjunction with the Sales Order Processing system and the Purchase Order Processing system, both of which are also documented in this series of Articles. Some aspects of the complete Inventory system are necessarily dealt with in these two other systems i.e. Receipt of Items from Suppliers and Issue of Items to Customers, together with Quantity and Cost information. You should therefore use this Article in conjunction with the other two articles. You can operate the Inventory Management System for both Products (physical items) and Non- Products such as Services. Or you can operate it just as a Product Price Catalogue without reference to the Inventory Management facilities - if you, for example, have an arrangement whereby the Products are shipped directly from a third party supplier. You can also operate the system with or without the warehouse location facilities. This Article describes the full functionality of the System. 2. Code Management: Before setting up the Product Items in the Product Catalogue you need to set up Codes relating to the Products. Go To Setup Codes Maintenance Items. You should set up here your Product Groups (Items) and Product Sub-Groups (if required) and your Item Locations and Sub-Locations;

2 2/11 Setting up and allocating Product Groups and Sub-Groups will enhance your Sales Analysis Reporting. Locations and Sub-Locations, if used, will be used during Sales Order Processing Issues and Purchase Order Processing Receipts. Also at Stock Take/Inventory Check time. Next, Go To Setup Codes Maintenance Customers & Suppliers Price Categories. Here you can set up and maintain various Price Category Descriptions which will subsequently be used in the Product/Item Catalogue. The number of Price Categories is limited to 8 in total so you cannot add new ones, only edit the Descriptions of the existing ones which come supplied with the system;

3 3/11 You should now Go To Setup Default Settings Item Defaults Open. Here you set up the defaults to be used when setting up each individual Item in your Product Catalogue. These defaults can, of course, be overridden for a particular Product Item when setting up that Item (3. below). Next Go To Setup Company Details & Settings Settings where there are some Parameters and Check Boxes you should be aware of and which determine the behaviour of the system in regard to the matters indicated.

4 4/11 The Prevent from selling below cost Check Box will inhibit Selling Prices which are below Average Cost (plus Margin % - see 3. below) being used at Customer Order/Invoice stage. If this Check Box is left un-ticked the system will Produce a Warning only but will still allow use of the offending Price. The Tick Box entitled Prevent from selling items with no stock on hand is very important. If you leave this Tick Box un-ticked and allow Stock to go negative in a Sales situation it will create problems with the calculation of the Average Cost and consequent problems with the automatic calculation of the Cost of Sales relating to the Sales transaction. And the only reason you would want to allow this (apart from the fact that you genuinely have no stock on hand) is because Supplier Receipts haven t been updated prior to Customer Issues for a particular Product Item. It is strongly recommended that you prohibit this behaviour and when a situation occurs where there is no Stock on Hand for a particular Item, then, without abandoning the Customer Invoicing program, temporarily switch to Supplier Receipts to receive the Items, and then revert to the Customer Invoicing Screen to continue. If however, you want to permit negative Stock then you should be aware that the System does not make the automatic Cost of Sales and Stock Control Account postings in this instance (System Accounts) and you must do this yourself manually through Journal Entries and/or Stock Adjustments. Please refer to Appendix A for a full description of how the system works in regard to this parameter. The third Check Box will result in a Colour Change highlighting those Supplier Orders which are overdue for delivery. 3. Setting up the Product Item Catalogue: Here you can set up your Product Items in your Inventory and Product Price Catalogue. Go To Stock Maintain Product & Prices Maintain Product Items; Click on New to add a new Product;

5 5/11 On this first screen you can enter your Product ID (Item Code), Descriptions (Supplier s and Sales), Product Type, Re-Order Level and the Supplier s Product Code or Serial No. In the case of Product (Stock) Types the system will maintain and track the Quantity fields (On-Hand, On-Order, Reserved, etc.) and which you cannot set up or amend here. On the second screen, you can now add the Product Groups and Sub-Groups that you set up in 2. above from their respective Drop Down lists; The Defaults have also been carried across from the Item Defaults that you previously also set up in 2. above but you can now override these defaults if you want to. For example it is unlikely that all your Products will be stored in Bin1 in the Stockroom. On the third screen you can enter various Prices according to the various Price Categories you set up in 2. above; These will be employed at Customer Order Entry stage in the Sales Order Processing System. The Last Cost and Average Cost fields are maintained by the system. The Margin field contains a percentage value where 20% is coded as If you Tick the Margin Warning Check Box this will cause a warning to be produced during the Order Entry or Invoicing process if the Selling Price is less that the Average Cost plus the Margin percentage of the Average Cost or, if the Prevent from selling below cost check box is ticked in the Company Details & Settings, then it will prohibit the Selling Price being used where it is less than this value. When you have finished entering or altering the data, click Process to the update the record to the Product Price section of the database.

6 6/11 4. Managing Prices and Price Lists: As well as the Prices that you set up on your Product records above, you can also create Price Lists with alternative Prices and Price structures. These can be used, for example, for Promotions - where you decide to sell specified Products at a different Price for a period of time, also Volume Pricing and Discounting, and/or, specific Prices for certain groups of Customers. How it works is as follows; On the Customer s Master Record there are two fields labelled Price Category and Price List on the Finance Tab. The Price Category field is mandatory and determines which one of the eight Price Categories is to be used for this Customer. This will subsequently determine the Price to be used for each Product at at Order or Invoice stage (which can, of course, be overridden at that time). The Price List field is optional. If left blank, then the Prices to be used at Order/Invoice stage are determined by the Price Category for the Customer as above. If, however, it contains a valid entry from the list of Price Lists (see below) then the system will use this field to examine the Price List in question to ascertain whether or not a Promotional Price or some other special Price arrangement might apply instead. To set up your Price Lists Go To Stock Maintain Products & Prices Maintain Price Lists; Click on the field under the label Code to edit the Price List Description and Click on the field under the label Edit to maintain the Price List itself;

7 7/11 Here you can, against nominated Products, enter an Override Price, or a Discount percentage to be applied to the Price Category Price, but not both. You can also specify a Start Date and an End Date (which, of course, can be forever if you want to apply special Prices or Discounts to specific Customers). The example above shows, in Line 1, a special Price for Kelly against Product SPV6 for the month of July for Orders of 5 units or more. Lines 2, 3 & 4 show a Volume Discount against SPV8 with 10%, 20% and 30% Discounts on the Price Category Price for Orders of 10+ Units, 20+ Units and 40+ Units. 5. Bulk Price Update: With this facility you can update your Product Prices either individually or in Groups without having to recall each of the Product Master Records in turn for this purpose. Go To Stock Maintain Products & Prices Item Bulk Update whereupon you will be presented with a screen similar to this one; The first element of functionality you should focus on is the Grid Options facility which is described fully in the Article How do List and Grid Filters Work?. Here you can choose which fields, from the available list, you want to include in the display grid - but, more importantly, you can select a subsection of your Product Price Catalogue in order to Bulk Update that particular sub-set as regards price adjustments. For example, you could use the filters to select the Item Group and/or Item Sub-Group fields to refine the filter for a particular Price update;

8 8/11 And, of course, you can combine filter fields with each other in order to refine your Product sub-set. Next, having selected the Product sub-set you wish to update, you can, of course, just key in the new Prices against each of the Price Category fields followed by Bulk Update. Alternatively, you can use all of the Drop Down Lists at the top of the Screen; to modify all of the prices in the chosen sub-set as follows; These allow you to adjust any of the Prices by the available formulae. For example, you can adjust the Standard Price from what it was by a chosen percentage or a fixed amount. Or, you can set the Trade Price to be 90% of the Standard Price and so on. Percentages are coded as 2.00 equals 2%. If you choose to Increase or Decrease by a fixed amount then the % field changes to an amount field. Tick the Round check box if you wish to define how the new updated prices should be rounded. The options are to round up, round down or round to the nearest value. If you choose Round to the nearest value a further set of options is presented allowing you to round to the nearest number or multiple of a selected value. For example if you wish you could round to the nearest 1.00 and then adjust by Thus, you could add 30% to 2.00, round to nearest 1.00 and adjust by -.01 to yield an end price of Inventory Check/Stock Take and Stock Adjustments are detailed in another Article entitled How do I Carry out an Inventory Check or Stock Take (with Adjustments)?.

9 9/11 Appendix A Prevent From Selling Below On Hand Quantity Setting This company setting Setup Company Details & Settings prevents you from selling an item that has no stock on hand (when ticked) or selling a quantity greater than that on hand. In other words, when you are processing a sales invoice, you will be prevented from completing the sale if there is no stock on hand at the invoice date for any of the items being sold. The reason for this control is to avoid discrepancies arising in the calculation of the Average Cost of the item and consequent discrepancies in Cost of Sales postings to the GL and in Sales Analysis Gross Margin reports. A common problem for any inventory-based business is ensuring that receipts (i.e. goods inwards) are recorded before sales (i.e. goods outwards). Once stocks go negative the cost of the items being sold is not there to determine cost of sales properly, either with Average Cost, FIFO or LIFO methods. Allowing negative stock results in incorrect Stock Valuations and Cost of Sales postings. The ability to turn this off allows you to override this control and process sales even if the stock on hand is negative. However this also turns off the calculation of Average Cost and the GL Cost of Sales postings, meaning you must manually post an end-of-month adjustment for closing stock on hand. If you have the control turned on, the system will display a screen like the one shown below when an invoice is being posted which will result in negative balances. This lists all items on the invoice that will result in negative on hand quantity. The date shown is the date at which the on hand quantity will go into negative territory, which could be in the past if you are posting a back dated invoice.

10 10/11 If you receive a warning list you should process any pending stock receipts or post a stock adjustments if the balance is incorrect before the invoice can be processed. In the case of a sales order, you will be warned that there is currently no stock on hand to fulfil the order but you will be able to go ahead and process the order as there are no actual stock movements at this point. This will allow for outstanding receipts to be posted before the order is completed and invoiced. To ensure proper controls are exercised on stock postings, this setting is always turned on by default. This extra control ensures that the average cost can be calculated correctly by the system and consequently the Cost of Sales and Stock Control figures in the GL. NOTE: When you sell something in the system by posting a Sales Product Invoice, it posts Cost of Sales and Stock Control transactions with the sales transaction so that the GL is always up-todate. These are generated based on the calculated average cost of the items sold and posted to the GL along with the normal sales postings. Turning this setting off If your business absolutely requires you to be able to sell stock that has not been received yet (i.e.: the receipts are not posted before the sales are processed), you can choose to uncheck this setting if you wish. In this case, the system will not auto calculate the Average Cost and will not create cost of sales and stock value postings to the GL. However purchases will be posted as before leaving the total of all purchases in the P&L. You will therefore need to create manual month end journals to post the closing stock to ensure that your Profit and Loss and Balance sheet accounts correctly reflect the stock element. To determine the Closing Stock value, you can use the Stock Listing report to determine the quantity of stock you have on hand at month end. The value of this can be determined by each item's "Last Cost" or its "Average Cost", which are updated by the system when Purchases are posted but can be maintained by you to the value that you wish to use to value stock. Note: the quantity on hand shown at the end of the month may not be the physical stock you have on hand - it represents what has been entered in the system so far for items which have their stock quantities tracked (i.e. have the 'Track Stock Levels' flag set). You may need to do a stocktake and record any differences to the system using the Stocktake function. WARNING: If you then attempt to turn this setting back on after you have processed stock transactions, the system will perform a check to ensure that there are no stock items that have a negative on hand quantity. If there are any such items you will be prevented from turning the setting back on.

11 11/11 In this scenario, the best course of action would be to perform a system stock take which resets the on hand quantities of all items and resets the average cost of those items based on the recorded values. How this setting affects calculation of Average Cost and your Stock Valuations The system uses the Average Cost accounting method to value stock. The Average Cost of each Item is determined on purchases by adding the value of the purchased items to the value of the Items in stock and dividing by the total quantity on hand (after the purchase). This facilitates posting Cost of Sales and Stock Values movements with every sale at the time of the sale so that the costs shown in the Profit and Loss represent the sales that have been made at that time, not just at month end. Valuing stock this way allows for: 1. Roll-up of costs where landing, transport and other such costs need to be added to the product cost to get a true cost for each item 2. Margin analysis for all sales in both Sales Analysis and Profit & Loss reports to be produced at any time not just at month end after a stock take has been carried out and posted 3. In addition the Stock Control figure in the Balance Sheet should be accurate at any time, reflecting all movements posted at that time. The method is ideal in retail or services environment as it smoothes out price fluctuations and therefore the value of stock used to calculate the cost of sales and ultimately profit. IMPORTANT: To correctly control and value your stock we strongly recommend that you use this setting to prevent your users selling items that you do not have on hand.