Does anyone know of potential issues when the "allow negative inventory" feature is enabled in I/C? We want to use this feature to be able to ship before product can be received in PO, but are not sure how well this works regarding costing etc. Does it create accounting issues if the recent cost is different from the old stock to the new stock?
Any input is appreciated.

Thanks!

This method is used by the majority of OE users for the reason stated.

The accounting issues include using the most current price on record in IC, which may not be the new price not yet received in PO. Depending upon the setting in PO any cost adjustment will either go to the remaining stock or to COGS.

When setting up new items make sure you setup a most recent cost or $0.00 will be used if the item is sold before the receipt is posted.

Thanks!

Hi,
Actually, if you are setting up a new item and you are using Purchase Orders for Adagio, you do not normally need to set up the recent price with a value.

When you create a PO for an item to order it (to sell or use), the PO price or Cost is updated to the recent cost as soon as you post the PO, if the recent cost value (previously on file) is zero for that item. We put that into Purchase Orders so that you can run the End of Day processing in Order Entry or POA in any order.

Doug was quite correct, that if the recent cost is zero when you process an invoice for an item, it will use $0 as the cost of sales if no items are on hand or the sale goes into negative numbers. However, the above change was implemented to minimize the likelihood of these types of costing errors. The only time it cannot help is if the PO is created with no cost details, and the costs don't get updated until the invoice arrives. Until this feature was available, we did the same as what Doug recommended.

Best,
Brian

Brian:

Your theory assumes that a PO is issued prior to the first sale and is setup to update the cost upon posting. I don't always find this to be the case (and you even allude to this) so it's safer to add a cost when creating new items (not to say that I don't love the changes you have made to PO).