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Stockable vs Non-Stockable Items

Audience: Business stakeholders, product managers, operations team

Overview​

Not every item a company manages needs to be tracked as physical inventory. Our system allows items to be either stockable or non-stockable.

This distinction is important because:

  • Stockable items take up warehouse space and tie up cash
  • Non-stockable items still need to be tracked (for sales, pricing, etc.) but don't require inventory management
  • The system behaves differently for each type

Stockable Items​

What Are Stockable Items?​

Items that:

  • Physically exist in warehouses or storage locations
  • Have quantities that we track
  • Move between locations
  • Affect inventory levels when bought, sold, or transferred
  • Have a cost value on the balance sheet

Examples​

  • Raw Materials

    • Fragrance oils
    • Bottles and caps
    • Labels and packaging
    • Boxes and cartons

  • Finished Products

    • Completed perfumes ready to sell
    • Gift sets
    • Retail-ready packages

  • Components

    • Parts used in assembly
    • Subassemblies
    • Work in progress items

Characteristics​

CharacteristicStockable Items
Tracked in warehouses?Yes - we know exactly how many and where
Has inventory transactions?Yes - receipts, shipments, movements, adjustments
Affects financial inventory value?Yes - appears on balance sheet
Can be counted?Yes - during physical counts
Negative stock allowed?Configurable per item (see Business Rules)

Non-Stockable Items​

What Are Non-Stockable Items?​

Items that:

  • Don't physically exist as inventory
  • Don't have quantities in warehouses
  • Can still be sold to customers
  • Don't affect inventory balances

Examples​

  • Services

    • Consultation services
    • Installation and setup
    • Training sessions
    • Warranty extensions

  • Intangible Products

    • Software licenses (if not tracked as physical boxes)
    • Digital downloads
    • Subscription services

  • Expense Items

    • Office supplies that are immediately expensed
    • Items purchased for one-time use
    • Samples given away (not tracked as inventory)

Characteristics​

CharacteristicNon-Stockable Items
Tracked in warehouses?No - no warehouse locations
Has inventory transactions?No - no receipts or shipments
Affects financial inventory value?No - not on balance sheet as inventory
Can be counted?No - nothing to count
Can be sold?Yes - appears on invoices

How the System Handles Each Type​

Creating an Item​

When setting up a new item, you decide whether it should be stockable or not:

Stockable Item Setup:

  1. Create the item (item number, name, description, category)
  2. Enable stockable behavior
  3. Configure:
    • Can this item go negative? (Yes/No)
    • Track by location? (Yes/No)

Non-Stockable Item Setup:

  1. Create the item (item number, name, description, category)
  2. Leave stockable behavior disabled
  3. That's it - no inventory configuration needed

Changing Stockable Status​

Important Business Rule: Once an item is set up as stockable and has inventory transactions, you generally cannot make it non-stockable (and vice versa) without special procedures.

Why?

  • Stockable items may have inventory balances
  • Historical transactions reference the item type
  • Financial records depend on consistency

Real-World Scenarios​

Scenario 1: Perfume Bottle (Stockable)​

Item: Midnight Rose Perfume 50ml Status: Stockable Why: Physical product that we store, track, and ship

Lifecycle:

  1. Purchase from supplier: +100 bottles received at Main Warehouse
  2. Current inventory: 100 bottles in stock
  3. Customer order: -10 bottles shipped to customer
  4. Remaining inventory: 90 bottles in stock
  5. Financial impact: 90 bottles × cost per bottle = inventory value

Scenario 2: Installation Service (Non-Stockable)​

Item: Perfume Display Installation Service Status: Non-Stockable Why: It's a service, not a physical product

Lifecycle:

  1. No purchase needed: We don't "buy" this from suppliers
  2. No inventory: Doesn't exist in warehouses
  3. Sold to customer: Appears on invoice
  4. Revenue recognized: When service is performed
  5. No inventory impact: Service doesn't affect balance sheet inventory

Scenario 3: Sample Bottles (Could Be Either)​

Option A: Stockable

  • If you track how many sample bottles you have
  • If you want to know when you're running low
  • If samples have significant value

Option B: Non-Stockable

  • If you give away samples freely
  • If you don't want to track quantities
  • If samples are immediately expensed when purchased

Business Decision: Choose based on how important tracking is for your business

Business Rules​

Negative Stock​

Only applies to stockable items

Question: Can we sell or ship more than we physically have?

Answer: Configurable per item

Allow Negative Stock = Yes

  • System lets you ship 10 units even if you only have 5
  • Inventory goes to -5
  • Useful for: Items on order, backorders, service-based products

Allow Negative Stock = No

  • System prevents shipping if not enough in stock
  • Useful for: Valuable items, regulated items, items that must be on hand

See: Negative Stock Policy

Location Tracking​

Only applies to stockable items

Question: Do we track quantities separately for each warehouse/location?

Answer: Configurable per item

Track by Location = Yes

  • System maintains separate quantities per location
  • You can see: 50 units in Warehouse A, 30 units in Warehouse B
  • Useful for: Most inventory items

Track by Location = No

  • System tracks total quantity only
  • You see: 80 units total (location doesn't matter)
  • Useful for: Virtual inventory, items managed centrally

See: Location-Based Tracking

Financial Impact​

Stockable Items​

Balance Sheet:

  • Appear as "Inventory" asset
  • Value = Quantity × Cost per unit
  • Increases total assets

Income Statement:

  • When sold → Cost of Goods Sold (COGS) expense
  • Reduces gross profit

Non-Stockable Items​

Balance Sheet:

  • Do NOT appear as inventory
  • No asset value

Income Statement:

  • When sold → Service Revenue (or product revenue)
  • No COGS (or COGS comes from expense accounts)

Common Questions​

Q: Can I change an item from non-stockable to stockable later?​

A: Technically possible, but requires careful consideration:

  • Item must have zero inventory balance initially
  • Historical sales may need adjustment
  • Finance team should be consulted
  • Usually easier to create a new item instead

Q: Can I sell non-stockable items?​

A: Yes! Non-stockable items can appear on sales invoices and generate revenue. They just don't affect physical inventory levels.

Q: What happens if I try to receive a non-stockable item from a supplier?​

A: The system won't allow it. Non-stockable items don't have purchase receipt transactions because they don't exist as physical inventory.

Q: Can a non-stockable item be a component in a Bill of Materials?​

A: No. Manufacturing requires physical components, so all BOM components must be stockable items.

Q: Do non-stockable items have item numbers and prices?​

A: Yes! They still need:

  • Item number (for reference on invoices)
  • Name and description
  • Pricing (selling price)
  • Category
  • Tax group

They just don't have inventory tracking.

Best Practices​

When to Make Items Stockable​

  • Anything you physically store in a warehouse
  • Items with significant value
  • Items you purchase in bulk and use over time
  • Items you need to count during physical inventory
  • Items used in manufacturing (BOM components)

When to Make Items Non-Stockable​

  • Pure services (installation, consulting, training)
  • Digital products (unless tracking licenses as inventory)
  • Items immediately expensed when purchased
  • Items where tracking inventory adds no value
  • Low-value promotional items given away freely

Consistency is Key​

  • Similar items should have similar stockable status
  • Document your policy for each category
  • Train purchasing and sales staff on the difference
  • Review quarterly to ensure items are set up correctly

Last Updated: 2025-10-28