Residual values
A "residual value" is the difference between a product's current value and its initial purchase landed costs. When a product is receipted into your inventory, the product's Average Landed Cost (ALC) is recalculated, using the receipted purchase price and distributed costs, to determine the product's current total stock value.
A residual value error can occur and will stop a Supplier Return from being completed if:
The returning value of a product is greater than the current on-hand value, regardless of the current stock on hand quantity.
The returning value is less than the current on-hand value, and the Supplier Return is also expected to reduce the product's stock on hand to zero.
To resolve a residual value error, you must update the product's current total stock value to match the value of the stock being returned, which can be done using either a stock revaluation or a value-only Stock Adjustment. For detailed resolution:
Identify the Residual Value Amount: Locate the error message specifics to determine the residual value for each affected product.
Perform Value-Only Stock Adjustments: Create adjustments for each affected product by inputting the inverse of the error value, e.g., input -19.42 if the error value is +19.42.
Re-check for Completion: After adjustments, proceed to complete the Supplier Return to ensure the issue is resolved.
If a residual value error occurs because the "Return" checkbox was not selected during the Supplier Return, consider completing a manual stock adjustment as follows:
Manually adjust the stock value associated with the unchecked return.
Specify the stock adjustment at the original purchase order (PO) value. This approach ensures consistency by reconciling the inventory to properly reflect the stock removal from the Supplier Return.
Example of a residual value
Let's say you have 1 unit of a product in your SOH, and it has an ALC of $105, meaning its total stock value is $105. This 1 unit is due to be returned to your supplier, but was originally purchased at $100. If a Supplier Return were to be completed, the unit would be removed from your SOH up to its original purchase value; thus, the product's remaining stock value would be calculated as $105 - $100 = $5. As this remaining $5 does not have any SOH to allocate to, it is considered a residual value that needs to be resolved before you can complete the Supplier Return.
Value-only Stock Adjustments
A value-only stock adjustment allows you to update a product's current total stock value, without adjusting its SOH quantity. The adjustment would also result in the product's ALC being recalculated to align with the new total stock value.
To complete a value-only stock adjustment:
From the main menu, navigate to Inventory > Transactions > Stock Adjustment and select Add Adjustment.
In the Product field, search and select the product that requires value adjustment.
In the Quantity field, enter 0.
In the Value field, enter the total value needing to be adjusted, based on the total SOH quantity. To decrease the product's value, enter a negative number, e.g., -5.
Click on Add.
Select Complete, and the product's stock value will adjust by the value entered and its ALC will be recalculated.
If facing discrepancies, identify specific error values and use inverse adjustments to clear them.
Example of a residual value adjustment
If you encounter a minor residual value error, e.g. -0.02, follow these steps:
Navigate to Inventory > Transactions > Stock Adjustment > Add Adjustment.
Select the problematic product.
Set the quantity to "0."
Enter the inverse of the error's residual value, e.g. 0.02.
Add the adjustment and select Complete.
This ensures your inventory value aligns with the original received value, allowing you to process the Supplier Return successfully. If larger residual discrepancies occur, adapt the steps by identifying the exact value and recalculating the adjustment to match them precisely before retrying the return.
Tips for completing a value-only Stock Adjustment
Select a warehouse in the Stock Adjustment's Warehouse field that currently has an SOH greater than zero.
Create an Adjustment Reason specifically for Stock Adjustments completed for residual value corrections to aid accurate and insightful reporting.
If integrated with an accounting provider, use the Account field in the Stock Adjustment to select which Cost of Goods Sold (COGS) account the adjustment should apply to.
When addressing discrepancies caused by unreturned stock due to unchecked returns, ensure the stock adjustment reflects the original PO value for accurate inventory reconciliation.
For recurring errors, consider periodically reviewing processes to ensure the "Return" checkbox is consistently selected during Supplier Returns.