Improving reporting outcomes for businesses holding/selling Consignment Stock

started a topic over 1 year ago

Hi all,

I've been working on finding a better way to manage Consignment Stock (as Consignee) than DEAR's advised process, simply because you get no margin reporting using DEAR's way, because the value of the goods is never linked to those sold.

DEAR's way is as follows (high level overview):

  1. Create Stock Adjustment to bring items into "Consignment" Location. Items must have quantity but have $0.00 unit cost - as we do not own the items yet.
  2. Sell the items, ensuring to Pick from the "Consignment" location - this enables you to run an Inventory Movement Details Report to determine what Consignment items were sold.
  3. Use this data in 2) to create a PO to pay for the goods you have sold - ensuring you code the Invoice lines to an expense account so that the items received are "written off" straight away.

That process is fine and supports the practical actions that a user needs to take to effectively move stock in and out in a Consignment scenario - but the reporting is not good because we cannot work out our margin on each product without using manual reporting workarounds.

Therefore, I have come up with a different way which I have tested briefly, but that I think will stand up to scrutiny - hence why I am posting it here, to validate that (and to share with the community, seeing as there is not a lot about Consignment on here).

My process for the GOODS IN part is as follows:

  1. Create Purchase Order for items wanted from Consignment Supplier (let's assume total cost of items is $10,000)
  2. Receive items into "Consignment" Location per normal Purchase Process
  3. Process Supplier Invoice as normal BUT add an additional charges line called "CSTOCK: Consignment Items held in Stock" (Current Liability account). This line should have a quantity of 1 and a price of -$10,000 - this ensures that the line total is -$10,000 and therefore bring the invoice to a $0.00 total.

At this point in the process, we can run an Inventory Movement Summary showing $10,000 of Stock in Consignment Location (yes, we know it's not ours - hence the different location) and we also have a Liability account with $10,000 offsetting this.

My process for GOODS OUT is as follows:

  1. Prepare sale order as per normal process
  2. Ensure Consignment items are picked from Consignment Location
  3. Finalise Sale Invoice

At this point in the process, the Stock value has reduced to nil (simple example), we can see Sale - COGS - Profit reporting for the items that is correct, and we have a $10,000 balance remaining in Current Liability account created in first process.

My process for PAYING FOR CONSIGNMENT STOCK SOLD is as follows:

  1. Run Inventory Movement Details report to determine units sold
  2. Create PO to Supplier reflecting these
  3. Process Supplier Invoice for these items when it arrives - ensuring that the GL code is changed to the Current Liability account
  4. Click Yes when prompted about the items being written off immediately because the GL account you're using is a Liability/Expense and not an Asset
  5. Process the Stock Receive to the Consignment Location

At this point in the process, we have completed the cycle of the consignment goods being moved in, sold out, and then paid for. We no longer have a balance in our Current Liability account, our stock of these items is $0 and we can report on margin by product sold without consignment sales skewing the COGS numbers.

I can forsee some minor issues with this:

  • Small businesses without a strong accounting skillset in-house may struggle to manage the flow of info/reconciliations needed for the Current Liability account, due to timing differences between Stock value reduction on Sale, and processing the supplier invoice for items sold.
  • Technically we do not own the stock so shouldn't be reporting this as stock value (minor issue to me, not sure how anyone else feels)
  • User data entry issues (another thing for them to remember vs normal consignment process)

The only thing required from DEAR to add reporting capability to show margin by product by location would be to add the "Picked Location" column to the Sale by Product Details report. Then this works well, in my opinion.

Anyone that has had some experience with DEAR and reporting on consignment stock as consignee, please read this and offer your thoughts either here in a reply or direct to me at

Thank you! 

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