I’ve recently came across the problem, that the Inventory Valuation shows a negative quantity. It got me really concerned because the Inventory Setup states clearly “Prevent Negative Inventory”. So, how is a negative quantity possible? As typically in Dynamics NAV, the problem looks frightening, but the reason is logical.

The purchase process for goods and services in Dynamics NAV is very flexible and it is possible to configure Dynamics NAV to match different scenarios. If you post the Receipt and the Invoice of a purchase in one go always, you do not use the Warehouse Management-Module and you will never come across a negative quantity in the Inventory Valuation.

In case you have a Warehouse and post the Receipt and the Invoice in two separate steps, it is necessary that the different contributors post their documents as soon as possible in NAV. Because of real business life, this is not possible always. The result could be a negative quantity in the Inventory Valuation.

A negative quantity appears in the Inventory Valuation, when receipted goods are sold before the invoice of the supplier is posted.

A typical Purchase Process

I have outlined a typical purchase process (with a Warehouse) in the following diagram. I like to highlight the purchase process, because the problem occurs when two two parts of a process operating parallel, but do not finish at the same time.

In this diagram, the first row represents the tasks in the financial department (all blue elements). The yellow element on the left represents the purchase initiator (for example the purchase department). The bottom green elements representing tasks in the warehouse.

This process is pretty common across multiple industries. It may be the case, that in your business the process is different. For example, the finance department (blue row) does not regularly check that the goods have been received in the Warehouse (green row). Or maybe, the Warehouse reports back to the purchase initiator directly (yellow element), that the goods have been received. The initiator informs then the finance department about the purchase.

The exact details of your company’s purchase process do not matter. You will see a negative quantity in the Inventory Valuation Report when the receipted goods are sold before the supplier invoice is posted.

How to create a negative quantity on purpose

I have prepared an example in the Web-client of Dynamics NAV 2018 to demonstrate a negative quantity in the Inventory Valuation. It may be the case, that the screenshots do look different compared to your Dynamics NAV. This could be, when you are using a different version. Thanks to Dynamics NAV, the core processes are very uniform between different versions. The Page-names and steps are normally the same too. Please consider also, that I’m using the Demo-Database which contains a specific set of predefined Items. Your Items are probably totally different!

My first step is to create a Purchase Order to order Loudspeakers (yellow element). Please click on the pictures to open a larger view.

The next step happens in the Warehouse. I switch into the role of a Warehouse Manager and confirm the receipt of the purchase (green elements).

My Loudspeakers are available in the Inventory now (orange element). My supplier normally sends invoices 2 weeks after the purchase. The finance department has to wait for the invoice, before they can post the financials (blue elements).

The following screenshots shows the receipt in the inventory. Please note the column “Cost Amount (Actual)”. This column shows the costs of purchase (COGS) and is 0. It’s because the supplier invoice is not posted yet in this scenario.

The initial position for a negative quantity in the Inventory Valuation Report does exist now.

My next step is, to create a simple Sales Order for my recently received Loudspeaker and post it.

The result is, that the Inventory Valuation Report does show a negative quantity now. Please click on the picture to open a larger view.

Takeaway

The above example demonstrates how a negative quantity in the Inventory Valuation Report is possible. At this point, the setup “Prevent Negative Inventory” do comes into effect, because “Prevent Negative Inventory” is used for physical inventory transactions only. For example, when you try to post a negative adjustment higher than the available inventory, Dynamics NAV will show an error message and prevent to post the adjustment.

The Inventory Valuation is based on invoiced transactions only. Because I didn’t post the supplier invoice in my example, the Inventory Valuation “can’t see” the receipted Loudspeakers. This behavior is reasonable. The costs of the purchase are unknown without the supplier invoice.

The good news are, as soon as I do post the supplier invoice, the Inventory Valuation will recognize the costs and show the complete transaction.

Do you came across a problem in Dynamics NAV which you don’t understand? Feel free to leave me a reply below or get in contact with me here!