Good inventory management is the secret to business success, and Odoo Inventory offers a good way of monitoring stock and product movement. However, scrap adjustments are the most crucial aspect of inventory management, which is so easy to overlook.
You’ve got rotten goods, expired products, or general goods that aren’t going anywhere, and knowing how to manage scrap adjustments within Odoo Inventory effectively is the secret to keeping your books and inventory as current as possible. This tutorial will explain what scrap adjustments are, why we need them, and how we need to ensure they are appropriately accounted for within Odoo.
What Is Scrap in Odoo Inventory?
Odoo scrap is products that are unsaleable, useless, or of no utility. These products will either be scrapped due to their spoilage as they were stored, expired after their dates, or are not of good quality. Not tracking scrapped products will make your inventory inaccurate and impact your reporting, forecasting, and financial statements.
You can scrap products for a variety of reasons:
- Defective products: Goods damaged or in the process of accumulating faults when in the process of being handled, moved, or warehoused.
- Expired products: Items that have passed their sell-by date and can no longer be sold or used.
- Outdated inventory: Products obsolete or replaced by subsequent versions.
Through proper documentation of your scrap adjustments in Odoo, you keep your inventory and book records up to date.
Why Scrap Adjustments are Significant in Odoo
Scrap adjustment is not just reconciling your on-hand inventory but also how you remain up to date with your books. You need to be vigilant not to miss accounting for scrap. Otherwise, your system no longer reflects your inventory and can severely damage reporting, inventory control, and profitability.
Products scrap when there are changes in Odoo:
- Stock levels are updated: Your stock is reduced by the quantity of scrapped products.
- Accounting entries are automatically generated: Odoo automatically posts accounting entries to reflect the loss; hence, your books of account and the cost of goods sold (COGS) are current with reality.
Correct scrap adjustments do not allow you to:
- To overstate stock levels
- To under or overstate product valuations
- Errors in accounting, such as miscalculated profit margins
In short, scrap adjustments are a significant part of maintaining your business’s inventory and finances in balance.
How Scrap Adjustments Work in Odoo Inventory
When you post a scrap adjustment in Odoo, you’re affecting your on-hand inventory and accounting. Here’s why:
- Inventory Levels: Your on-hand quantity has the scrapped quantities subtracted from it, so your inventory is accurate.
- Financial Entries: Odoo also generates a financial entry for items scrapped, which impacts your General Ledger and records the reduction in inventory value in your accounting statements.
This is to account for the fact that scrapping something not only diminishes your stock but also keeps your business’s accounting finances current so that your books of account remain in sync with your physical stock.
Step-by-Step Guide: Recording Scrap Adjustments in Odoo
1. Going to the Inventory Module
Go to the Inventory module of Odoo. You can perform all your inventory operations, such as scrapping materials here.
2. Making a Scrap Adjustment
In case you are already on the Inventory module, then proceed by following these steps to make a scrap adjustment:
- Click on the Operations top menu.
- Go to Operations to Scraps to direct you to the scraps management page.
3. Choosing the Product to Scrap
Scrap page: publish and create the scrap adjustment. You will be required to input:
- What product is being scrapped?
- Scrapping product number.
- Where the product is currently situated (i.e., what warehouse or where the product is currently in stock).
4. Recording the Reason for Scrapping
It’s good to include why the product is being scrapped. This provides an easy means of tracking repeated issues and can be helpful for future reports or audits. Odoo provides default scrapping reasons such as:
- Damaged
- Expired
- Obsolete
You can also define the reasons based on your business’s particular requirements if necessary.
5. Closing the Scrap
After inserting all the information, press Save to finish the scrap adjustment. Your levels will be updated automatically, and necessary accounting entries will be made to record the loss in your books.
Optional: Utilizing Barcode Scanning to Make Quicker Adjustments
You can use barcode scanning to automate the scrap adjustment if you carry surplus inventory. You can quickly scan the items and enter their scrap adjustments using barcode scanning, which may help you avoid efficiency loss and chances of errors.
The Financial Impact of Scrap Adjustments
How Scrap Affects Inventory Valuation and Stock Levels
One of the most compelling reasons you require scrap adjustments is that they affect your inventory value. When you scrap an item, Odoo reduces your stock and changes the value of your inventory. You have a clear idea of what you have at the moment by doing this and its value, and this helps you keep your company as efficient as possible.
Let’s consider an example where you invoice off 10 units of some product. Below is what will occur:
- The product stock amount will be reduced by 10.
- Value inventory is being re-computed on today’s price for the 10 units.
This will bring your inventory accounts into reality, and you will work with real-looking stock levels.
The Effect on Accounting
Scrapping Odoo products will affect your stock and accounting. When you scrap a product, Odoo automatically creates accounting entries for the cost of the scrapped out-of-stock goods.
This is how, for example, if the product is scrapped, Odoo will:
- Subtract the cost of scrapped goods from your stock account.
- Make sure COGS and any other corresponding accounts are worth scrapped materials.
These reconciliations keep your profitability margins and account balances up to date with a reasonable estimate of your entire company’s cash position.
Conclusion
Well-managed scrap adjustments are worth it to keep your Odoo Inventory system and your books up to date. Keeping with the scrapped product keeps your accounting reports and actual on-hand stock current, preventing discrepancies, enhancing reporting, and providing a better picture of your business activity.
Odoo makes scrap adjustments easy to manage, and with the easy steps given above, you can be confident that your inventory is always current and your books are clean. From faulty merchandise, old inventory, or past-expiration stock, having scrap adjustments maintained by Odoo Inventory ensures you remain in control of your business and make more data-driven, informed decisions.
