Consignment Purchase Orders

A consignment purchase order is an agreement with a vendor that allows the product to be received, but the inventory still belong to the vendor until the product is used. The product is not received into live inventory and does not have a value assigned to it, but will be displayed as consignment inventory. Payment for the product does not occur until the product has been used. Pricing can be established in the purchase order or at the time that the product is received. The following processes are outlined in the document to create consignment transactions,

• Creating a Consignment Purchase Order
• Creating a Receiving Transaction
• Creating a Consignment Transfer Transaction
• Creating a Purchase Invoice

Create a Consignment Purchase Order

 The complete process to create a purchase order is outlined in Create a Basic Purchase Order. The only additional requirement for a consignment purchase order is that the Consignment flag is selected to indicate that the purchase order is a consignment order. If the approval process is implemented, the purchase order must be approved prior to being posted. Details related to approving purchase orders can be reviewed in Purchase Order Approval.

Create a Receiving Transaction

The receiving transaction will receive the product to consignment inventory. To view the complete details, view Receiving for the applicable transaction type.

1. The process creates a consignment inventory quantity.
2. Journals are not created as there is no value on the inventory until the product is used.

Inventory View

The inventory view will have the consignment flag selected and there will be no value associated with the inventory. The view can be easily filtered to include or exclude consignment inventory.

Create a Consignment Transfer Transaction

There are specific transactions to outline the complete process for each product type. To view the complete details, view Consignment Transfer for the applicable transaction type.

1. A consignment transfer transaction is created in order to move the inventory from consignment to product inventory.
2. Journal transactions are created  to record the receiving to inventory based on the amount defined on the purchase order or, alternatively, the amount defined in the consignment transfer screen.

 

Debit	Product Inventory
Credit	Accounts Payable Accrual

 

3. The product moves to inventory at the value defined on the purchase order.

Create Purchase Invoice

The complete steps to create an invoice for a consignment purchase is outlined in Purchase Order Invoice. The purchase invoice will only process payment for the amount of the product defined in the Consignment Transfer.

1. A purchase invoice is created for the vendor using PO Invoice, in order to pay for usage.
2. A journal transaction removes the amount from the accrual account and recorded payable.