Inventory Flow
Complete end-to-end documentation of inventory transactions in NetSuite - covering adjustments, transfers, physical counts, and revaluation.
In This Section
| Page | Description |
|---|---|
| Adjustments | Increase, decrease, and write-off inventory |
| Transfers | Move inventory between locations |
| Physical Counts | Inventory counting and reconciliation |
Master Flow Diagram
INVENTORY TRANSACTION TYPES
─────────────────────────────────────────────────────────────────
┌─────────────────────────────────────────────────────────────────┐
│ INVENTORY ADJUSTMENTS │
├─────────────────────────────────────────────────────────────────┤
│ │
│ ┌─────────────────┐ ┌─────────────────┐ ┌─────────────────┐ │
│ │ INCREASE │ │ DECREASE │ │ WRITE-OFF │ │
│ │ │ │ │ │ │ │
│ │ GL: Inv ↑ │ │ GL: Inv ↓ │ │ GL: Inv ↓ │ │
│ │ Adj Acct ↓ │ │ Adj Acct ↑ │ │ Expense ↑ │ │
│ └─────────────────┘ └─────────────────┘ └─────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────┘
┌─────────────────────────────────────────────────────────────────┐
│ INVENTORY TRANSFERS │
├─────────────────────────────────────────────────────────────────┤
│ │
│ Location A Location B │
│ ┌─────────────┐ ┌─────────────┐ │
│ │ │ ═══════════════════▶│ │ │
│ │ Qty: -10 │ Transfer Order │ Qty: +10 │ │
│ │ │ │ │ │
│ └─────────────┘ └─────────────┘ │
│ │
│ GL: Location A Inv ↓, Location B Inv ↑ (if tracked) │
│ │
└─────────────────────────────────────────────────────────────────┘
┌─────────────────────────────────────────────────────────────────┐
│ PHYSICAL COUNTS │
├─────────────────────────────────────────────────────────────────┤
│ │
│ ┌─────────────────┐ ┌─────────────────┐ │
│ │ COUNT INVENTORY │ ──▶ │ ADJUST TO │ │
│ │ (Record counts) │ │ ACTUAL │ │
│ │ GL: None │ │ GL: Adjustment │ │
│ └─────────────────┘ └─────────────────┘ │
│ │
└─────────────────────────────────────────────────────────────────┘
Inventory Basics
Key Inventory Metrics
| Metric | Meaning |
|---|---|
| On Hand | Total physical quantity in warehouse |
| Available | On Hand minus Committed |
| Committed | Reserved for orders (SO, WO) |
| On Order | Expected from POs |
| Backorder | Customer orders waiting for stock |
INVENTORY QUANTITIES EXPLAINED
─────────────────────────────────────────────────────────────────
Example: Widget-A
On Hand: 100 ← Physical count
Committed: 25 ← Reserved for SO-001
On Order: 50 ← Coming from PO-001
Backorder: 10 ← Waiting for stock
──────────────────
Available: 75 ← Can sell (100 - 25)
GL Flow
INVENTORY GL ACCOUNTS
─────────────────────────────────────────────────────────────────
BALANCE SHEET (Asset):
Inventory Asset Account
└── Increases with: Purchases, Returns, Adjustments up
└── Decreases with: Sales, Returns to vendor, Adjustments down
INCOME STATEMENT (Expense):
COGS Account
└── Cost of goods when sold
Adjustment Account
└── Variances, write-offs, count adjustments
Quick Reference
Transaction Summary
| Transaction | GL Impact | Inventory Impact |
|---|---|---|
| Inventory Adjustment (up) | Inv ↑, Adj Acct ↓ | On Hand ↑ |
| Inventory Adjustment (down) | Inv ↓, Adj Acct ↑ | On Hand ↓ |
| Transfer Order | Location A ↓, Location B ↑ | Moves between locations |
| Physical Count | None until adjusted | None until adjusted |
| Count Adjustment | Inv ↑/↓, Adj Acct ↓/↑ | Corrects On Hand |
When to Use Each
| Scenario | Transaction |
|---|---|
| Found extra inventory | Inventory Adjustment (increase) |
| Lost/damaged inventory | Inventory Adjustment (decrease) |
| Moving between warehouses | Transfer Order |
| Annual inventory count | Physical Count → Adjustment |
| Receiving donations | Inventory Adjustment (increase) |
| Scrapping defective items | Inventory Adjustment (write-off) |
Costing Methods
NetSuite supports multiple costing methods:
| Method | Description | GL Impact |
|---|---|---|
| Average | Weighted average of all costs | Re-averages on receipt |
| FIFO | First In, First Out | Sells oldest cost first |
| LIFO | Last In, First Out | Sells newest cost first |
| Standard | Fixed cost with variances | Variance on receipt |
| Specific | Lot/serial specific cost | Tracks individual items |
COSTING EXAMPLE: AVERAGE
─────────────────────────────────────────────────────────────────
Starting:
100 units @ $10 = $1,000 total
Receipt:
50 units @ $14 = $700 total
New Average:
150 units @ $11.33 = $1,700 total
(1,000 + 700) / 150 = $11.33 per unit
Next Steps
- Adjustments - Learn inventory adjustments
- Transfers - Move inventory between locations
- Physical Counts - Conduct physical inventory