Quite often business agree to sell goods before they actually have them. So when you use an inventory system that stores stock as an Asset this poses a problem because the effect can be negative inventory. Drop shipping, Ebay sales, Pre-ordering etc. can all lead to this situation.

If your transaction practices follow a fairly standard process you see in day to day commerce then it shouldn’t actually ever be an issue.

If you try to create a Sale for goods that you don’t have yet, most accounting systems will stop you, as does Saasu. It does this because it expects a different workflow. Accounting systems expect Sales Order initially and later to see that change to a Sale when a trigger occurs for you to change it’s status. In Saasu this is the first drop-down in the Add/Edit Sale screen. Changing a Sales Order to a Sale moves any deposit to income and accounts for Sales/GST/VAT tax to be payable.

The trigger could be the receipt of goods from the supplier or the delivery of goods to your customer as examples. It all depends on your workflow plus accounting procedures and how they relate to laws and regulations around ownership and transfer of ownership in your tax zone.

I Saasu you can only run negative inventory (other than the approach mentioned above) if your inventory items are set to “I Buy” and “I Sell” but not “I Inventory”.

When using an inventory system it can’t operate on negative inventory because it would send Asset: Stock account into a negative balance which the accounting profession doesn’t like. Accordingly some people don’t run inventory as Assets (they trade their stock through Income and Expense accounts “I Buy” and “I sell” Options only). Again, this is a different accounting/tax method so check with your accountant before making these decisions.