Stock Value Differences


INFORMATION icon
There may be differences between the Stock Value Report and the Stock Nominal.

The reasons for stock value differences when comparing the Stock Value report and the Stock Nominal include:

This page details the affect this has on the accounts.

Account Colour Legend

Throughout this page each potential issue will have an example with a note displaying how the accounts are affected, the colours represent:

  • Red + or - The nominal or report will be displaying an incorrect figure:
    • + (Plus) Means the figure is larger than it should be.
    • - (Minus) Means the figure is smaller than it should be.
  • Green = The nominal or report will be displaying the correct figure.
  • Orange = The nominal or report will be displaying a figure close but potentially not equal to the correct or final figure.

Stock Received not Invoiced (SRNI) - stock has been booked in on the delivery note, but not invoiced to the accounts

Stock Received not Invoiced - Off

If the Stock Received not Invoiced option is turned off in the [ System Values | Accounts | General | General ], then the discrepancy could be large depending on how much many purchases are currently being processed. The discrepancy between the stock nominal and the stock value report will be at least the value of the stock calculated from the purchase orders values.

Until the Purchase Invoice for delivered stock is received, the Stock Nominal will be lower than the Stock Value report based on the current stock value until the Purchase Invoice is received and posted thus updating the stock value.

  • Stock Nominal -
  • Stock Value Report -

Stock Received not Invoiced - On

If the Stock Received not Invoiced option is turned on in the [ System Values | Accounts | General | General ] tab, then the discrepancy between the stock nominal and stock value report will be much smaller. There could be no difference if there is no change between the Purchase Order price and Purchase Invoice price for the stock item.

  • Stock Nominal +/-
  • Stock Value Report +/-

Note certain additions or amendments to a Purchase Invoice will not fully reverse the SRNI posting and leave a residual value in the SRNI nominal.

  • Stock Nominal +
  • SRNI Nominal +
  • Stock Value Report =

Example - SRNI

Scenario

  1. A PO is raised for 100 items at £1 each.
  2. 110 items are delivered, this creates a £110 journal from SRNI Nominal to Stock Nominal.
  3. The invoice is for the cost of 100 items as the additional 10 were free.

Result

Depending on how this is accounted for this could leave a residual value in the SRNI Nominal and inflate your actual stock value.

If you discount the original Purchase Invoice line for the items by the value of the free items e.g. DiscL £10 reducing the total from £110 to £100 this will correctly reverse the SRNI Journal.

If you set the original line to 100 x £1 = £100 and...
Add a second line of 10 x £1 @ 100% Disc or 10 x £0, then the system will only reverse the original line Purchase Invoice.
This means your Stock Nominal will still be incorrect at £110 and not £100 and there will be a credit of £10 left in the SRNI Nominal.

Non stock controlled items show in nominal but not in the stock value report

If a user purchases a non-stock controlled item the value of that purchase will be added to the stock nominal when the purchase invoice is posted. This value will NOT be accounted for on the Stock Value Report but will have been added to the Stock Nominal assuming the stock option COS Excluded is OFF (unticked) and no Stock Item Purchase Nominal is specified against the stock item.

  • Stock Nominal +
  • Stock Value Report =

The value of the non-stock controlled item will remain present in the Stock Nominal forever unless the user journals it out. The user is responsible for this!

Stock Controlled Items marked as Stock COS Exclude

Stock Controlled items that have been purchased with the stock option COS Excluded ON (ticked) and a stock item Purchase Nominal defined against them will have their value posted to whichever purchase nominal is defined against them.

This item's value;

  • WILL be included in the Stock Value Report, and
  • will NOT be included in the SRNI journals when it is being delivered, if enabled.

Purchasing Stock Controlled Items marked as stock COS Excluded will have the following effects:

  • Stock Nominal =
  • Stock Value Report +
  • Stock Item Purchase Nominal +

The stock value of a Stock Controlled Items marked as stock COS Excluded will never be updated and can be considered to be using Standard pricing.

Selling a Stock Controlled Items marked as Stock COS Exclude will have the following effects:

  • Stock Nominal =
  • Stock Value Report -
  • Stock Item Purchase Nominal +

Non-Stock Controlled Items marked as Stock COS Excluded

Stock items that are non-stock controlled and marked as COS Excluded normally should never create any discrepancies in the Stock Nominal or Stock Value Report as they will not be recorded in either. Historically it may be possible for a non-stock controlled item with COS Excluded turned on to NOT have a Purchase Nominal defined against it.

In that scenario the purchase of that item would go into the Stock Nominal and would need to be dealt with manually.

  • Stock Nominal -

Journals in or out of the Stock Nominal

Journals into or out of the stock nominal will NOT be accounted for on the Stock Value Report. This can become an issue if someone has entered a stock value journal incorrectly. This is sometimes done by a user who is trying to get a desired stock value figure and is often carried out by a user who doesn't realise how the system works.

  • Stock Nominal +/-
  • Stock Value Report +/-

Changes in the stock items' stock value over time

The stock value calculation method can account for large and varying stock value discrepancy. Using the correct calculation method for your business process can make a huge difference to keeping discrepancies in line.

Average Pricing

Average Pricing in most cases is the most accurate over time for most users. Although the user need to be aware that there are certain purchasing situations that will create immediate discrepancies; for example if they always sell all delivered goods before receiving the Purchase Invoice, which updates the stock value calculation.

Example - Average Pricing

Scenario

  1. A customer places a Back Order for 10 items that have a stock value and buy price of £5.00 NET each.
  2. You create a Purchase Order to fulfil the Back Order requirement.
  3. The goods are delivered and the sales order is immediately fulfilled. They are issued with a Cost of Sale of £50 (10x£5) as that is current average.
  4. The Purchase Invoice finally arrives and the items are now £8.00 each.

Results

Once the Purchase Invoice is posted £80 is booked into stock but the COS was £50 leaving £30 in stock that doesn't exist on the shelf so the accounts will be out in the following areas:

  • Stock Nominal +
  • Stock COS Nominal -
  • Stock Value Report +/-

In the above example the use and manipulation of Standard pricing could have greatly reduced the discrepancy.

Standard Pricing

Standard Pricing is where the user controls the stock value. Unless they recalculate the value of stock items for each purchase there will always be a discrepancy unless the purchase value never changes. This method used globally will inherently have larger discrepancies.

Example - Standard Pricing

Scenario

  1. A customer places a Back Order for 10 items that have a manually set stock value of £5.00.
  2. A Purchase Order is created to fulfil the Back Order requirement.
  3. The goods are delivered and the sales order is immediately fulfilled.
  4. The user adjusts the stock value to £7.50 as they know the bill be around that price. The order issued with a COS of £75 (10x £7.50 per item).
  5. The Purchase Invoice finally arrives and the items are now £8.00 each.

Results

Once the Purchase Invoice is posted £80 is booked into stock but the COS was £75 leaving £5 in stock that doesn't exist on the shelf. The accounts will be out in the following areas:

  • Stock Nominal +
  • Stock COS Nominal -
  • Stock Value Report -

This is the same scenario used in the Average pricing section, In this case Standard pricing has reduced the Stock Nominal discrepancy in comparison.

Last Price Paid

Last Price Paid updates the stock value to the NET last price paid for that stock item. Discrepancies will simply come down to rate of sale verses purchase price fluctuation i.e. if you buy and sell all your stock regularly the difference will be quite small but if the sales/purchase periods are large then very large difference are possible. This can be compounded by the non-posting of invoices.

Using this stock value calculation method will inevitably require intervention in the accounts.

Example 1 - Last Price Paid

Scenario

  1. A customer places a Back Order for 10 items that have a stock value and buy price of £5.00 NET each from the last purchase.
  2. You create a Purchase Order to fulfil the Back Order requirement.
  3. The goods are delivered and the sales order is immediately fulfilled. They are issued with a Cost of Sale of £5 as that is what you last paid.
  4. The Purchase Invoice finally arrives and the items are now £8.00 each.

Results

Once the Purchase Invoice is posted £80 is booked into stock but the COS was £50 leaving £30 in stock that doesn't exist on the shelf. The accounts will be out in the following areas:

  • Stock Nominal +
  • Stock COS Nominal -
  • Stock Value Report -

Example 2 - Last Price Paid

Scenario

Another purchase and sale scenario that Last Price Paid would not be suited to is:

  1. You have no stock.
  2. You create a Purchase Order, Delivery and Post the Purchase Invoice for 10 items at £1.00 each, add £10 into Stock.
  3. A customer places an order for 20 items which needs to be despatched as a whole order.
  4. You create a Purchase Order for another 10 items to fulfil the Back Order requirement.
  5. The goods are delivered and the sales order is immediately fulfilled. They are issued with a Cost of Sale of £20 (20x£1) as that is what you last paid.
  6. The Purchase Invoice finally arrives and the items are now £2.00 each.
  7. Once the final Purchase Invoice is posted, £20 is booked into stock.

Results - buy price was low then high

The COS was £20 leaving £10 in stock as there was already £10 in from the first Purchase (£10+£20-£20=£10). The accounts will be out in the following areas:

  • Stock Nominal +
  • Stock COS Nominal -
  • Stock Value Report /+

Results - buy price was high then low

The COS was £20 leaving £10 in stock as there was already £10 in from the first Purchase (£10+£20-£20=£10). The accounts will be out in the following areas:

  • Stock Nominal -
  • Stock COS Nominal +
  • Stock Value Report -

This demonstrates the limitations of Last Price Paid.

Customer returns - stock has been booked back in but the credit note has not been issued yet

Move Stock on Process - On

When the Customer Return option Move Stock on Process is ticked (On) (default) the stock value of any returned goods will not be accounted for in the Stock Nominals until the Credit Note is issued. The value will be present in a Stock Value Report at the current stock value.

Pre-posting of Credit Note:

  • Stock Nominal =
  • Stock Value Report +

Move Stock on Process - Off

If Move Stock on Process is turned off either in the Customer Return or the [ Edit Process Path | Return Stages ], then the inverse applies. The Return Credit being issued puts the value of the stock back in the Stock Nominal but as the Return is not marked as complete until the is Issued/Refund Issued then no stock has been physically returned and therefore the Stock Value Report will not include stock item until the Return is marked as Issued/Refund Issued.

Pre-posting of Credit Note:

  • Stock Nominal =
  • Stock Value Report -

Adjusting stock in without a value and then adding a value later

Generally this is only an issue when users are untrained or new to the system and simply incorrectly set an item up and adjust it in. This is fairly easy to spot if the DCOS report is used on new systems but requires investigation of the stock adjustment history and stock nominals for companies that have been using the system for a while. The results of various scenarios are listed below:

Adjusting an item in with no stock value

Simply adjusting an item in with no stock value will affect the following areas:

  • Stock Nominal -
  • Stock Value Report - If the stock value is left at zero

Processing an order with the zero stock value item

Processing an order with the zero stock value item will affect:

  • Stock Cost of Sale - If orders are issued with zero stock value (No DCOS used)

An incorrect fix by simply entering a stock value

An incorrect fix by simply entering a stock value will affect the following areas

  • Stock Nominal -
  • Stock Adjusted -
  • Stock Value Report -

Processing an item with an incorrectly fixed stock value

Processing an item with an incorrectly fixed stock value will affect:

  • Stock Nominal -
  • Stock Cost of Sale - If orders are issued with zero stock value (No DCOS used)

Not or Never posting Purchase Invoices

If you do not or have never posted a Purchase Invoice then no Stock Nominal entries will have been made. The stock value report will return results but will be incorrect if average or last price paid is used as the non-posting of the purchase invoice renders these calculation methods useless.

  • Stock Nominal -
  • Stock Cost of Sale -
  • Stock Value Report -

Timing of Purchase Invoice Posting

There are two variables that can contribute to major differences and incorrect stock values depending on your business processes:

  1. The timing between sold stock being despatched and the receipt of the Purchase Invoice.
  2. Stock Value Calculation Method.
  3. Special consideration must be made for the following items in regards to the timing of purchase invoice postings and their stock value calculation method:
    1. Dropship.
    2. Items on Consignment.

General Increase in purchase costs

If there is an general Increase in purchase costs the accounts will drift in the following fashion:

  • Stock Nominal +
  • Stock Cost of Sale -
  • Stock Value Report -

General Decrease in purchase costs

If there is an general Decrease in purchase costs the accounts will drift in the following fashion:

  • Stock Nominal -
  • Stock Cost of Sale +
  • Stock Value Report +


INFORMATION icon
If your business process is affected by late receipt of Purchase Invoices or at least the despatch of sold goods before receipt then the above mentioned problems will arise. A review of your stock calculation method and business process is necessary


Not Dealing with Stock Overheads

Overheads can be entered into the OvHds field in the Pricing area on the [ Stock | Detail | Properties ] tab and automatically if updating overheads when using the Consignment module, see Updating stock with amortised values.

If an Overhead is defined against a stock item then the nominals will be affected in the following way:

  • Stock Nominal -
  • Stock Cost of Sale =
  • Stock Overhead Nominal -

A correcting journal from the Stock Overhead Nominal to the Stock Nominal would be required to fix this issue.


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