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Handling consignment inventory in Acctivate.

This article guides you through the process to set up a consignment warehouse, create and receive PO for a consignment vendor, and selling from the consignment warehouse.

By definition, consignment inventory is inventory stocked in your warehouse, but still owned by your vendor.

The following steps are not intended for tracking inventory at your customers' locations. Please contact our support team to discuss customer consignment.

In order to track consignment inventory in Acctivate, you will need to setup a separate consignment warehouse. This warehouse should be used solely for the purpose of tracking the quantity on hand for the consigned inventory. By setting up the warehouse and processing like below, you will only see an affect on your general ledger once you've sold the consigned inventory and created a vendor bill for the amount owed. The following steps outline how to setup the new warehouse, as well as track the consigned inventory through the entire process.

Setup a Consignment Warehouse

  1. In your accounting software, setup a new GL account for the consignment inventory called "Consignment Adjustments" with the account type set to Expense.
  2. Run a synchronization to bring the new account into the list in Acctivate.
  3. Open Acctivate and navigate to Configuration Manager (File > Configuration Management).
  4. Select Inventory > Warehouse
  5. Click the New button.
  6. Enter information for a new Consignment warehouse; enter the Warehouse, Description, and Name fields. Name it in a way that indicates this is a consignment warehouse.
  7. In the Warehouse Accounts section, select the new Consignment Adjustment account for all but the Issue GL Account.
  8. When you are finished setting up the consignment warehouse, click the Save button. The new warehouse should look something like the screen shot below:
ConsignmentWarehouseSetup-1

 

Create and Receive Purchase Order for Consignment Vendor

  1. Create a new Purchase Order for the vendor in which you will be tracking the consignment inventory.
  2. Change the Warehouse on the Purchase Order to be the newly created Consignment Warehouse.
  3. Enter the products you wish to track in the Detail tab of the Purchase Order with the price the vendor will charge you once the products are sold. It's OK if the exact vendor price isn't known at this point.
ConsignmentPO-1
  1. Receive the products into your Consignment Warehouse. Since both the Inventory and Purchases GL Accounts match, the receipt transaction will net at zero in your general ledger.

Selling from the Consignment Warehouse

  1. Create a new Sales Order to sell the consigned inventory to your customer.
  2. Sell the consigned inventory out of the Consignment Warehouse
  3. When ready, invoice the order.
SalesInvoice-2

You may need to notify your vendor of the sale so that they can provide you with a Purchase Invoice. Or, you may enter a Purchase Invoice for the sale as a way to notify the vendor you've sold the goods. Once you're ready to enter a Purchase Invoice proceed to the next section.

Create Vendor Invoice for Sold Quantities from Consignment Inventory

  1. Open the original Purchase Order used to receive these items into your consignment warehouse and click Invoice
  2. Override the Quantity field to reflect the quantity that has been sold to your customer. If the cost of the product is different than what is shown, you may change it here. This will be used as the cost for the COGS and the remaining inventory in the consignment warehouse.
  3. Click Save and Create Invoice after entering all required information (Invoice #, Invoice Date, Terms, Due Date.)
ConsignmentPOInvoice

 

As you can see, the only difference between processing consignment and regular inventory transactions is the warehouse used and the fact that  you may need to notify your vendor fo the sale so they can prepare a Purchase Invoice.

Assigning the proper accounts to the warehouse is key to this process. Below are two screen shots which illustrate the financial impact.

The original receipt created journal 1168 which credits and debits the Consignment Adjustments account resulting in a zero sum transaction. However the value is tracked in Acctivate.

When the inventory was sold, the Cost of Goods Sold is removed from the Consignment Warehouse and moved to the Cost of Goods Sold account for the product.

Likewise, the Purchase Invoice is used to offset the value of the inventory that the vendor billed you for, moving it to Accounts Payable.

CongsignmentAdjustmentGLEntry


Received 30 Cs of the B10 at $34.00 per case:

  • Debit Consignment Adjustment Account for $1,020.00
  • Credit Consignment Adjustment Account for $1,020.00

Vendor invoiced 20 Cs of B10 at $34.00 case after selling to your customer:

  • Debit Consignment Adjustment Account for $680.00
  • Credit Accounts Payable Account for $680.00
Invoiced Customer for 20 of the Consignment Product at $43.00 per case:
  • Debit Accounts Receivable for $860.00
  • Credit Revenue/Sales Income for $860.00
  • Debit Cost of Goods Sold for $680.00
  • Credit Consignment Adjustments Account for $680.00
PLTransaction

This leaves a liability to your vendor via the Vendor Bill, as well as adds to your Income based on the difference between the sale price and vendor cost.