Reserved and pre-paid orders: sold stock still in the warehouse

A customer has paid a deposit on a dining-room set and is waiting for the delivery date. The set sits in the warehouse but is no longer sellable. If the record still shows it as "available", a sales assistant can sell the same set to a second customer; if it has been removed from the record, the count will show it as a surplus. Reserved and pre-paid orders call for two separate figures: physical stock and sellable stock. This article explains how to keep them.

Three statuses

Goods tied to a customer can be at one of three stages:

• reserved: promised to the customer, no payment yet; the reservation is time-limited;
• pre-paid: a deposit has been taken and the goods are set aside in the customer's name;
• sold, ready for collection: payment complete, the goods are waiting for delivery in the warehouse.

All three are physically in the warehouse and are counted; none of them is sellable stock. All three also need to be recorded in one place that everybody can see. In a store where reservations are made by phone or in a notebook, a second sales assistant cannot see them and the same goods are promised to two customers. A reservation record should carry the order number, item code, quantity, date and the person who gave the promise.

Two figures: physical and sellable

The formula is simple: sellable stock = physical stock − reserved − pre-paid − ready for collection. An illustrative case: the warehouse holds 18 dining-room sets, 4 reserved and 5 pre-paid. Sellable stock is 18 − 4 − 5 = 9 sets.

Two mistakes are common:

• removing the goods from stock when the deposit is taken: the record becomes 18 − 5 = 13, the count finds 18 and a false surplus of 5 sets appears;
• not separating them at all: the sales screen shows 18 although only 9 are sellable, and 9 sets too many can be promised.

Calculate the money side as well. With a unit price of 8,000,000 som and a 30 per cent deposit, one order carries 8,000,000 × 0.30 = 2,400,000 som of deposit; for 5 orders that is 5 × 2,400,000 = 12,000,000 som. Confirm with your local accountant how this amount is treated in the books; on the stock side what matters is seeing that the goods to be delivered against this money are set aside in the warehouse.

Physical separation: a ready-for-collection rack

Gather reserved and pre-paid goods on a separate rack. Hang a label on each showing the order number, the promised delivery date and the number of cartons. For multi-part furniture, check that all the cartons of a set stand on the same rack under the same label; a storekeeper who reads the label will not give the goods to another customer. Writing the order number rather than the customer's name protects privacy and lets the warehouse team work by number.

Time limits and cancellation

The reservation period should be written down, for example 7 days. When it expires, the goods are either released automatically or extended after a talk with the customer. For pre-paid orders the cancellation and refund terms must be clear in the contract; the refund of the deposit and the return of the goods to sellable stock should be recorded on the same day. Once a week compare the order list with the ready-for-collection rack: for every order older than 30 days, call the customer and fix the delivery date, because waiting goods tie up both space and capital.

How it is handled in the count

The counting team counts the ready-for-collection rack too. The report should show three lines: physical stock, reserved stock (with order numbers) and sellable stock. Reserved goods that do not match an order number, or orders whose goods cannot be found, are written up as variances. For the warehouse in the example the report reads: physical 18, reserved 4 + 5 = 9, sellable 18 − 9 = 9. When the three figures sit side by side, nobody is confused.

In short

Not removing reserved and pre-paid goods from stock, yet taking them out of sellable stock, corrects both the count and the sales. In store and showroom counts StockSystem looks for the movement that caused the gap between the count and the records; tracking reserved and pre-paid goods under a separate status can be part of the scope discussed at the first meeting.