V8 - Making adjustments to inventory

An adjustment increases or decreases the inventory quantities and cost basis recorded in SOS Inventory to compensate for on-hand variances. These discrepancies may be due, for example, to spoilage, theft, and loss, or for errors made in the receiving of items. The Adjustments list (Operations menu > Inventory > Adjustments) houses the records of all adjustment transactions entered into SOS Inventory.

You should use inventory adjustments sparingly, as most often inventory will be added or removed through item receipts and shipments. In some cases, however, you might run into a situation in which your physical (actual) inventory count does not match what the system shows.

In this case, your first step should be to determine why there is a discrepancy. Review the transaction history of an item to determine if any transactions were entered incorrectly or if any transactions were simply missed.

For a general overview of how lists work in SOS Inventory, refer to List functions. See Action and batch action descriptions for more information about the actions available on lists, including those on the Adjustments list.

Adding an adjustment transaction

If you are confident that the transaction history is correct and your count is still off, you might need to enter an adjustment. Use either of the following methods to add a new adjustment transaction:
 

• On the Task bar, go to Quick add menu > Inventory > Adjustment .
• Go to Operations menu > Inventory > Adjustments, then select Add new.

For explanations of data fields, refer to Adjustment form field descriptions.

Adjusting quantity

When entering an adjustment, first fill out the top of the form as appropriate. Then enter or select each item that you wish to adjust. Once selected, the current quantity on hand for an item (at the selected location, on the selected date) will show in the Old quantity field. You can then enter the appropriate value in either the New quantity or the Adjust qty by field, and the system will calculate the other one as needed.

Adjusting cost basis

When entering an adjustment, you will see a field on each line item labeled Adjust cost basis by. This allows you to adjust the cost on hand of each item. When you enter the quantity, SOS Inventory will enter a suggested cost adjustment in the Adjust cost basis by field. The suggested value is based on the quantity. If the quantity adjustment is positive (an increase), the suggested cost is the quantity multiplied by the standard cost of the item. If the quantity adjustment is negative (a decrease), the suggested cost is the cost basis using the chosen valuation method (FIFO, weighted average, LIFO). In both cases, the user can override the value. This is often used when adjusting for damages, depreciation, etc.

Adjusting by units of measure

You can adjust your inventory by stating the unit of measure you wish to adjust by. The system will calculate the change in quantity by the unit of measure ratio defined for the item and also change the cost basis accordingly.

Specifying an inventory adjustment account

When entering an inventory adjustment, the system needs to know the account to which you want the inventory adjustment to post. The exact transaction depends on the type of adjustment. If the quantity increases, SOS Inventory will post a debit to the inventory asset account and a credit to the adjustment account. If the quantity decreases, SOS posts a credit to the inventory asset account and a debit to the adjustment account.

You can specify a default adjustment account on the Settings menu > Inventory settings page. The default adjustment account is used for bulk edit adjustments and other situations in which no adjustment account is specified. When entering an adjustment directly, you can specify the adjustment account to override the default. The most common account used for inventory adjustments is Inventory shrinkage. When adding items to an account or opening a new account, you can use Opening balance equity.

Cycle counting/physical inventories

To simplify the cycle counting process, SOS Inventory provides the ability to conduct partial physical inventories using the adjustment feature as described above. Thus, each cycle count is really nothing more than a physical inventory which may or may not include counts of all items. The selection of items to count is left up to the user. It is not mandated by the system.

SOS Inventory provides a worksheet for you to print when working on physical inventories. To access the worksheet, go to Operations menu > Reports, then select Physical inventory worksheet under the Inventory section. Choose the date, filters, options, and columns that you wish to use, then select how you wish to receive the worksheet in the Actions block.

The SOS Inventory iOS app has the ability to conduct physical counts with an iPad, iPod Touch, or iPhone. For more information on this feature, see Conducting physical inventory counts with the iOS app.