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Proper inventory control is essential for your business. You need to be sure that you have enough of each item in stock, and you need to have updated and accurate inventory records. One of the biggest problems for your business is when you have negative inventory.

What Does Negative Inventory Mean?

The term negative inventory means that the inventory count says that you have less than zero of an item. This is often the sign of having a bad inventory management system. Too many companies today opt to see this as unavoidable and only fix it when it becomes a problem. They make the fixes for each instance of having negative inventory. However, the better solution is to be proactive. You want to find ways to avoid and prevent negative inventory issues from cropping up in the first place.

What Causes Negative Inventory?

Negative inventory could be caused by a range of factors, and there is no single issue that will affect every company. One of the problems could be timing. This can occur when a shipment of inventory has been recorded as complete even though it might still be in production. The negative balance could be caused because there is a delay in getting the products processed and on the warehouse shelves.

There could also be issues in production that cause less of a product to be produced than is needed. This could happen when the invoices were not clear, for example. If you have multiple warehouses that have the same type of inventory, it could cause a negative balance. If there is an order of goods made from the wrong location, it could result in inaccurate inventory records.

How Negative Inventory Impacts Business

How serious are negative inventory issues? There is a chance that the next order for the item will be wrong or unable to be completed. Customers will be upset when they place an order for an item that isn’t in stock. It means that they will have to wait until your inventory is filled again. People don’t like to wait, especially when they can often get items from your competitors in a couple of days.

When there is negative inventory, it could cause problems with record-keeping and accounting. There might eventually be too many items in stock, too. For example, if some were delayed and there was a problem with the paperwork, they might still be coming to the warehouse. If you place another order for the same products to be sent to the warehouse, you could end up having double on hand.

Countless issues could arise, and you will find that it can have a terrible effect on your business, your bottom line, and your customers’ trust. Therefore, you will want to take steps to make sure that you can avoid these issues or that you correct them right away if they do occur.

Preventing Negative Inventory in Your Warehouse

The best thing you can do if you want to prevent negative inventory problems from occurring is to make sure that you are proactive. Find areas that could make negative stock occur and utilize quality production management and inventory management software that can track and manage these aspects of your business.

If there are issues with negative inventory, track down what happened. Why was it negative? Where did the problem occur? Once you know where the problem originated, you can then make sure that it doesn’t happen again. Was it a timing problem or a location problem, as touched on above? Is there a problem with the manufacturing process?

Make sure that your online sales platforms are connected to your inventory and that the inventory is accurate. This way, you can reduce the risk of having customers buying items that appear to be in stock even though you have negative inventory. You don’t want your customers to think that there are items available if you still have to wait for a shipment.

The danger of negative inventory is quite real and can affect businesses of all sizes. Make sure that you have a good inventory management system in place, so you can reduce this risk. It will be better for you, your business, employees, and your customers when you do.

Inventory Management Software for SAP Business One and Macola

WiSys has re-invented how ERP systems create value for customers. To meet the business challenges of a new economy, companies need to focus on effectively managing their warehouse. WiSys Agility products have been designed to achieve efficient Warehouse Management (WMS), Supply Chain Management (SCM) and Business Intelligence (BI), all from one software publisher. Contact us to learn more.