DealersEdge Professional Forums

I understand the inventory side of neg OH... But what happens with the money ? The same as if it was a stock part ?..

The $ will go against the 24200 account in accounting if that is your question.

When the RO or counter ticket is closed and posted to acct'g, your parts inventory acct will be lowered, just like any other sale.
Just changing a part to negative on-hand does not change the book value, at least as far as I know. What DMS are you using ??

Is there more to your question that maybe we/I don't understand ??

The acct'g side and the count side are not dependent on each other and do not affect each other. That is why we take inventory to reconcile the two.

Correct me if I have mis-stated something here...

~ gt

The money doesn't go anywhere. The negative-on-hand feature is a tool that allows users to bill prior to posting, so the value floats until finishing the process. The other place it comes, erroneous transactions, must be researched and corrected in such a manner the GL and PAD values are accurate.

I agree, there must be more to your question. Perhaps knowing what prompted the question would help us to give you a better answer as this is not a two minute subject. Negative-on-hand is a deep, complicated subject. I block out an hour of time when I teach this subject to my Parts Managers, 20 minutes to explain and 30 minutes for questions, and it always runs long.

I look forward to hearing about your causal connection so we can give you the best answer. This is a huge reason inventory values get out of balance.

Excluding some sort of error in your posting processes, negative on hands come from pre-paid special orders. The on hand count is reduced by the quantity of the order despite nothing physically leaving the building yet. On the accounting side, the GL inventory value is also reduced by the cost value of the order.If you were to take a physical inventory that night, you would have an overage relative to the GL. When the item is received from the vendor and receipted into inventory, the on hand goes back to zero. And when the vendor invoice is paid, the GL value is increased by the cost. Now everything matches again.

This leads to two caveats when taking a physical. The pad value does NOT take into account neg on hands. To match the GL, they must be manually subtracted from the pad value as a reconciliation item. Second, any pre-paid special order items awaiting customer pick up should NOT be included in the count. They do not belong to the dealership, they are owned by the customer.

Oops, third caveat. Most systems re-set neg on hands to zero after an inventory. So make a list of the prepaid special orders awaiting receipt and reduce the on hand values back again using manual adjustment posting after the inventory. Otherwise all those items will show a higher count in the system versus the actual bin contents after the vendor orders are receipted.

After all is said and done, about negative on-hand quantities; is simply this: In the beginning, programmers and DMS designers did not know nor understand the need for a program or system to properly "pre sell" a part. The 'Negative on-hand' was then 'spun' to the "the way they do it" instead of designing a program that specifically allowed this pre-sale and properly took into account the impact of the on-hand and the accounting that went with it. Some of the 'more recently' designed DMS systems had designed programs that allow you to do that without the "-1" on hand value.

Which brings me to an observation: what exactly is -1 on hand? Is the bin "more than empty"? Is there a black hole back in parts "sucking up" the part?

It is not a serious error but one that goes back to the early 1970's when the three larger DMS systems were designed; they just don't want to spend the money on programming that would fix this perplexing, and quite visible, little glitch.

Nuff said: