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Community Explorer **

Inventory

Company uses QB Desktop 2016.  I am just the office manager, I have some basic accounting knowledge, but I am not a CPA.  New to the job, and unknown to me when I started, this company does not track inventory through QuickBooks program, the item list is for price reference only.  But since I didn't know this information at first, when I was creating invoices I was using the item list.  Every invoice I created also created a negative quantity in the item list and inventory.  While the company was applying for a loan in November, this error was finally brought to my attention by the bank.  When I brought it to the attention of the CPA for the company, his response "Yeah, I noticed that in July."  He gave me some adjustment to do so that we satisfy the bank and get the loan.  Had he told me about the problem in July I could have easily changed things and not have this huge problem.  Since he did not, he is now our former CPA and I have changed procedures so that invoices no longer go against the inventory, but I still have negative numbers in the inventory.  Is there a way to do an inventory adjustment without having to go into each individual invoice (over 600 were done wrong) and changing them so that they do not go against the inventory?

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Best answer 02-22-2019

Accepted Solutions
Highlighted
Anonymous
Not applicable

Re: Inventory

Yes

You need to do a retroactive inventory adjustment to create enough stock at the beginning of the invoice list so that the subsequent invoices can sell those items without going negative.

If you have not already done so - run an item sales report for the period in question so you get a list of the items & qnty needed.  You will also need to determine what the average unit cost of eash separate item was at that time - since the inventory is not in QB you will have to figure that out yourself.

It sound like the value of your stock was on the books somewhere - presumably in a current asset account. So when you make the inv posting that account should be where the 'adjustment' goes.

Caution - if this problem goes back into the prior fiscal year and that year has already been closed then you probably should split the list and only change the portions related to the current year. Then review with your new CPA.

View solution in original post

4 Comments
Highlighted
Anonymous
Not applicable

Re: Inventory

Yes

You need to do a retroactive inventory adjustment to create enough stock at the beginning of the invoice list so that the subsequent invoices can sell those items without going negative.

If you have not already done so - run an item sales report for the period in question so you get a list of the items & qnty needed.  You will also need to determine what the average unit cost of eash separate item was at that time - since the inventory is not in QB you will have to figure that out yourself.

It sound like the value of your stock was on the books somewhere - presumably in a current asset account. So when you make the inv posting that account should be where the 'adjustment' goes.

Caution - if this problem goes back into the prior fiscal year and that year has already been closed then you probably should split the list and only change the portions related to the current year. Then review with your new CPA.

View solution in original post

Established Community Backer ***

Re: Inventory

You don't have to use QB and "inventory Items" to use QB to Track inventory.

 

Using the Items = Perpetual Inventory Management.

 

You also can use Periodic Inventory Management. This is what, for instance, a used car lot of RV sales will do, because every item is not the Same Item, over and over. It's not, "Oh, here is another head of iceberg lettuce." Inventory Items need to be the Same thing, every time, counted and managed and on hand and restocked for selling.

 

"this company does not track inventory through QuickBooks program, the item list is for price reference only. But since I didn't know this information at first, when I was creating invoices I was using the item list. Every invoice I created also created a negative quantity in the item list and inventory."

 

Perhaps they also had a Noninventory Version of what they sold, before you arrived. Or, they used Service items. Look at older sales, to know what they listed in the past.

 

"While the company was applying for a loan in November, this error was finally brought to my attention by the bank. When I brought it to the attention of the CPA for the company, his response "Yeah, I noticed that in July." He gave me some adjustment to do"

 

Your Correction might be to update the sales to use the Right Item, and not the inventory items at all.

 

"I have changed procedures so that invoices no longer go against the inventory, but I still have negative numbers in the inventory."

 

Change the selling item(s) you listed there.

 

"Is there a way to do an inventory adjustment without having to go into each individual invoice (over 600 were done wrong) and changing them so that they do not go against the inventory?"

 

The problem with that concept is that you have to identify where is the value for what you sold, to reflect what it cost you to acquire it?

 

You don't just Throw Values at the data; you need to make meaningful entries.

 

Example:

 

1. You really did Buy the stuff you sold, but you didn't know to list the Inventory item on the Items tab of the purchases. That meas updating the Purchase transaction Details will put the cost and quantity on hand. Make sure you Bought it on a date that is before you sold it; this is sort of required in reality.

2. You custom ordered stuff that was sold, so the Noninventory item should be Two Sided, listed on the Items tab of the Purchase, job tracked that it is for that customer, Marked as billable, so that you can Select it when selling to the customer using Sales receipt or invoice. That means Changing the sales that used the Inventory item to the noninventory item. And if the purchases are already hitting COGS, then you don't also need further adjustments. And since you already put them on Sales, you don't need to go back to the purchase to job track it, unless you wanted to see the cost related to the sale for that same customer and item. And don't bother to mark them Billable now, since you already Charged the customer; you don't need that status, so click on and remove the checkmark.

3. Your sales listed inventory and you needed this to all be inventory. But, the purchases posted to COGS directly, every time. That means you were missing Asset value all along. That means you would update the Purchase details. Or, you would use Adjust inventory by dates, to update the things that were supposedly on hand before selling. You are doing a Quantity and Value adjustment and top left, you pull From the COGS account, because it was sent there prematurely from the Purchased data entered generically.

 

In other words, use the Fix that applies to the problem. That means updating Purchases, updating Sales, and/or making Inventory Adjustments.

 

Never use JE for this.

Community Explorer **

Re: Inventory

I'm trying to understand your answer and I'm having difficulty.  I'm thinking that you don't understand my question.  It is essentially is this:  I need to fix the negative numbers that are currently in the "total quantity" column of my "Item List".  That column needs to have all zeros in it.  I'm hoping there's an easy way to do this rather than going in and fixing over 600 invoices.

I need to fix a mistake I made for apx 6 months. If there truly is no easy fix, I will go in and change those 600+ invoices.

 

All of the other information in my question was to provide a bit of background information as to what led up to this mistake being made and to convey that the problem leading up to the mistake had been fixed, including getting rid of an incompetent CPA who could have told me about the mistake when it was a 2-month problem instead of a 6-month problem.  You seemed to think my background information was my question and never actually answered my question.

 

You state "You don't have to use QB and "inventory Items" to use QB to Track inventory."  I know that now, I didn't know that when I started in May.  The company I worked for previously did track inventory through QB and I assumed (wrongly) that this company did also.   You then go on for a long time about inventory management and that is not helpful information.  Not to mention it's contradictory - first you state I don't have to track it then go on to tell me how to track it.  Our inventory is tracked through a different program and the appropriate entries are made at the appropriate time.  No one is "just throwing values at the data".  I don't need QB to track the inventory.

 

You then seem to think I needed to know how to fix the invoices because you state "Perhaps they also had a Noninventory Version of what they sold, before you arrived. Or, they used Service items. Look at older sales, to know what they listed in the past."  Already did that, that is why I stated that procedures had been changed.

 

You then quote my question back to me and never actually answer it.

 

But I thank you for your input.

 

Established Community Backer ***

Re: Inventory

This is what you asked: "I need to fix the negative numbers that are currently in the "total quantity" column of my "Item List". "

 

And the point is, to figure out What is the Right Fix. That condition exists because you sold something you never bought. You need to Fix it for what Broke. That is either Populating the items that should have been on hand. Removing that what you sold wasn't really What you sold, or some mid-point that results in the correction you need.

 

This is not the fix: "and to convey that the problem leading up to the mistake had been fixed"

 

That is Preventing the oversight that allowed this to Continue.

 

"Not to mention it's contradictory - first you state I don't have to track it then go on to tell me how to track it. Our inventory is tracked through a different program"

 

Okay, that's a detail we needed and all we can do is describe things that Matter, in general. That helps you tell us your Specifics.

 

"and the appropriate entries are made at the appropriate time. No one is "just throwing values at the data". I don't need QB to track the inventory."

 

Exactly! What you have is a Periodic Inventory Management operation, then. Yes, you Throw Values "periodically." And yes, you Avoid using the Inventory Items in QB, which was the error.

 

"You then seem to think I needed to know how to fix the invoices because you state "Perhaps they also had a Noninventory Version of what they sold, before you arrived. Or, they used Service items. Look at older sales, to know what they listed in the past." Already did that, that is why I stated that procedures had been changed."

 

Remember, we cannot see Your File and we don't know what existed earlier. And yes, we peer users are trying to help with things we cannot even See. We tell you the same things we would be doing, if this file was in front of us to work on.

 

"You then quote my question back to me and never actually answer it.'


Well, yes, I did. I described the Various ways things go wrong, and Which and Where you control what needs to be controlled to make the Fix for the existing data.

 

Periodic Inventory management: All purchases are posted directly and generically to COGS or to Asset First. You never told us Which Is In your File.

 

Then, Periodically, we take a physical count and compute cost basis for what still is on hand, or get that info from a POS or "our other system" and Rebalance, by using a Journal Entry, between COGS and Asset, for what still is on hand and the basis or cost.

 

And that means Your Fix, is as follows:

 

Yes, you would Edit your Invoices and change them to using the Normal Sales or Charge item, which in your case is either Noninventory or Service or Other Charge (you didn't tell us what they Used to list for sales). That will remove all the chaos.

 

And Yes, this will take a while. But the work really is about the same amount of work: Adjust inventory item names when you never had inventory to start with, means also doing this by date Batches, to match to sales and avoid sales running negative. That is a Lot of Work, too, so fixing the invoices and sales receipts fixes Everything: Stops the inventory items from even being in use on the sales, removes the Computation that attempted to handle Average Costing and false COGS and negative quantity and removing asset when the Item was never stocked, to start with.

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