Maintaining a firm grip on inventory can be a challenge for even the most well oiled businesses. Some degree of accuracy to inventory levels , however, is necessary. To keep up that level of accuracy, sometimes NetSuite Inventory Adjustments are the key.
NetSuite Inventory Adjustments are necessary to align the system inventory position with the reality of physical stock. Underestimating inventory in the system can result in missed opportunities. Overestimating inventory could result in orders that can’t be fulfilled, unjustified increases in storage overheads and balance sheet discrepancies.
The key to resolving and preventing these issues is the NetSuite Inventory Adjustment record.
In this article, we will look at principles of inventory management, identify how the adjustment record should be set up and used, and introduce you to a number of tips and considerations to successful implementation.
What is a NetSuite Inventory Adjustment?
An Inventory Adjustment is a NetSuite transaction record that facilitates controlled increases, decreases and movements of inventory.
Using an Inventory Adjustment, a business can:
- Increase Inventory without raising a purchase transaction.
- Decrease Inventory without raising a sales transaction.
- Move Inventory between bins/locations/warehouses.
- Change the value of inventory.
The NetSuite Inventory Adjustment record is a posting transaction that affects the Inventory account of the items being adjusted. When increasing or decreasing inventory, the user selects which corresponding ledger account the adjustment should post to.
When and Why Should You Use the NetSuite Inventory Adjustment?
There are a number of reasons why you would need to use an inventory adjustment. Some of these will be part of business as usual (BAU) activities, but for the most part inventory should be affected by sales and purchases.
On occasion, however, you will need to manually affect your inventory levels, values or locations. These are the three main purposes of a NetSuite Inventory Adjustment.
Increase Or Decrease Inventory Levels With A NetSuite Inventory Adjustment
Inventory is normally increased or decreased through regular sales and purchase activities. If, however, an item is consumed internally, it does not make sense to raise a sales invoice. If an item is discovered in a dark corner of the warehouse then a purchase order is hardly going to be raised.
In these scenarios, the inventory of a specific item can be adjusted using the inventory adjustment.
After selecting the item and location, a Quantity On Hand column displays how many are on hand prior to adjusting.
Adjusting inventory in this way is common after a stock count. A single bulk inventory adjustment may be used to align the NetSuite position with the physical stock levels observed.
Change The Location Inventory Is Stored At Using A NetSuite Inventory Adjustment
Another outcome of the stock count may that items are found in a different location to that which they are recorded at in NetSuite.
You can use the inventory adjustment to decrease the quantity at the wrong location and then increase at the correct one. This is an efficient way of making corrective movements of inventory.
There is more than one way to move goods in NetSuite and the inventory adjustment should not become the default. However, for many unique scenarios it is the most efficient and appropriate process to use.
Remember that like most other records in NetSuite, the inventory adjustment has a User Notes and Files subtab. These can be utilized to attach additional documentation and supporting narrative for the adjustment.
Adjust The Value Of Inventory Using A NetSuite Inventory Adjustment
If one of your items is valued incorrectly in NetSuite then you can use the inventory adjustment to change that associated value.
In this scenario I have removed a quantity at the incorrect value and then added it back at the correct one.
The standard inventory valuation report can be used to verify the overall value of an item’s on hand quantity. This can be found at Reports > Inventory/Items > Inventory Valuation.
How to Enter a NetSuite Inventory Adjustment
Inventory adjustments can be entered manually through the UI, via a CSV import or via a custom process using scripts or workflows.
The CSV import process for inventory adjustments is not the most straight forward. Including a walkthrough of this process here would derail the article. Please click here to get full step by step instructions on how to use the CSV import feature for inventory adjustments.
To enter an inventory adjustment manually, navigate to Transactions > Inventory > Adjust Inventory.
If using a OneWorld account you will first need to select the Subsidiary. Enter a memo and select the ledger account you will be adjusting the asset values against.
Navigate down to the Adjustments tab where you will enter the items you are adjusting.
Populate the following columns –
- Adjust Qty By.
If you are adjusting the value of the inventory you may also want to edit the Est. Unit Cost column.
Click the blue Add button to complete the line and enter another one if necessary.
You can add supporting information via the Communication tab. The User Notes section can be used for written notes and documents can be uploaded via Files.
Complete the record by clicking Save.
Entering an Inventory Adjustment with Serialized or Lot Numbered Inventory
If you are using Serialized or Lot Numbered Inventory, then there are a few deviations from the above process.
Companies not using Advanced Bin Management will have a Serial/Lot Numbers column. Enter the relevant serial or lot numbers separated by a comma or a space.
If entering multiple lots, the quantity of each lot can be entered in brackets following the lot number. For example – Lot0001(5), Lot0002(10).
If Advanced Bin/Numbered Inventory Management is also in use, an inventory detail will need to be added. In the Inventory Detail column there will be an icon that, when clicked, opens an inventory detail popup. In the popup window, enter the following –
- Serial/Lot Numbers.
- Expiration Dates.
The inventory detail will need to be configured for each and every line of the inventory adjustment.
Accounting Impact of a NetSuite Inventory Adjustment
An Inventory Adjustment in NetSuite is a posting transaction. This means it has debits and credits posting to your ledger. The accounting impact of an inventory adjustment will vary depending on the following factors –
- The item being used.
- Whether the quantity is going up or down.
- The adjustment account selected.
- The quantity on hand (take a look at underwater sales, for example)
To view the financial posting of an adjustment, hover over Actions and click GL Impact.
In the example above I have reduced the quantity of a given item resulting in a credit to Stock on Hand.
The debit account is dictated by the field Adjustment Account in the header of the inventory adjustment.