How to use Negative Stocks and its purpose

How to use Negative Stocks and its purpose

Please advise me, how to use negative stocks. Mainly for what purpose this concept is used.
What settings are required to do for mainaining negative stock.

Negative stocks can be utilized for a number of different business scenarios, for instance:

1. If a material shipment is going to a customer, but the production has not yet confirmed (and there is not enough stock on hand to satisfy the requirement), instead of getting the “deficit of stock…” message when doing the issue for the delivery, the system will allow you to issue the material, and your inventory will show a negative quantity until the production confirmation is

2. I had a client who used this functionality to track component usage for their subcontractors. They would confirm production for an entire month for the FERT materials produced by the subcontractor. Starting the month with zero stock for all components, then at the end of the month the value of the component stock (disregarding the negative sign) would be deducted from the amount they owed for the services performed. In this agreement, the components were “sold” to the subcontractor but no invoicing ever took place for the components. Just a word of caution …negative stocks/values for materials can raise many questions for accounting purposes at the end of fiscal periods.

There have been several reasons for using the negative stock functionality subject to the specific business requirements of your industry. For us, we have decided to use this negative stock feature due to the following reasons:

1) Sales of finished products to customers. We are cement producer and in an effort to avoid any delay in selling our products to our customers, we determined to allow negative stock posting since it is of our cement industry that cement after being packed will be delivered directly to our customers ie. no temporary storage is required.

2) The alignment of inventory/stock movement with production process where due to some reason, the reception of raw materials and/or consumables was not maintained on time resulting in interruption of process order confirmation.

Can someone tell me what is the effect of negative stocks in material valuation, ie. moving average?

As you know negative stock will have negative value, which will have direct impact to financials. Say you have a material of Qty 10 Each, total worth $ 10.00 in stock and since you enabled negative stock in system ( valuation area level and plant- storage location level ) if you try to issue stock of say 20 Eaches, system will show stock of negative 10 and value $-10.00.

After that if you try to do goods receipt of say 20 eaches, of total value 20.00 material will have original status as you started. But if the value is different say 25.00, then moving average will be arrived from $15.

Why my stock is having negative stock value. The stock qty is 0. When I want to do GR, the system issue and error message saying my stock is negative. How can I do bypass it.

My assumption was that you are using MAP (Moving Average Price) Price Control for your material and that there was a price difference between IR value and GR value where IR value < PO value. In this case, the price difference will be credited to your stock and since the price difference value is in excess of your current stock value, this negative value took place.

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