Inventory Management software is used to track, manage and organize inventory levels, orders, sales and invoices. The software is commonly used alongside hardware such as barcode or radio-frequency identification (RFID) scanners. There are a number of inventory journal entries that can be used to document inventory transactions. In a modern, computerized inventory tracking system, the system generates most of these transactions for you, so the precise nature of the journal entries is not necessarily visible. Database management, inventory audit, maintenance. How to catalog new library items (practical advice)? Database maintenance, verify database integrity? Library inventory audit? See all Database Management, Inventory topics; Barcode Scanner/Reader. Does the Library Pro support a bar code scanner? Does this program come with a barcode reader.
- Librarian Pro 5 1 1 – Complete Personal Inventory Systems
- Librarian Pro 5 1 1 – Complete Personal Inventory System Template
There are a number of inventory journal entries that can be used to document inventory transactions. In a modern, computerized inventory tracking system, the system generates most of these transactions for you, so the precise nature of the journal entries is not necessarily visible. Nonetheless, you may find a need for some of the following entries from time to time, to be created as manual journal entries in the accounting system.
Inventory Purchase
Library Concepts (a Diakon Systems company) has been serving library automation needs for over 30 years. From our earliest DOS catalog card printing program to the latest Windows network and Web solutions, we have provided easy-to-use, powerful software with pricing for limited budgets.
This is the initial inventory purchase, which is routed through the accounts payable system. The debit will be to either the raw materials inventory or the merchandise inventory account, depending on the nature of the goods purchased. The entry is:
Debit | Credit |
Raw materials inventory | xxx |
Merchandise inventory | xxx |
Accounts payable | xxx |
Record Indirect Production Costs in Overhead
There are other types of production-related expenses that are allocated to inventory, such as rent, utilities, and supplies for the manufacturing operation. These expenditures typically begin as accounts payable and are allocated to an overhead cost pool, from which they are then allocated to inventory and the cost of goods sold. The allocation to a cost pool may occur later, but we will assume it occurs at the time of initial accounts payable recordation, with this entry:
Debit | Credit |
Overhead cost pool | xxx |
Accounts payable | xxx |
Record Production Labor in Overhead
Various types of production labor, such as production management salaries and materials management wages, are also routed through an overhead cost pool, from which they are later allocated to inventory. The entry for this is usually a shifting of the wages expense into a cost pool, with this entry:
Debit | Credit |
Overhead cost pool | xxx |
Wages expense | xxx |
Move Raw Materials to Work in Process
If you are operating a production facility, then the warehouse staff will pick raw materials from stock and shift it to the production floor, possibly by job number. This calls for another journal entry to officially shift the goods into the work-in-process account, which is shown below. Flawless 1998 cast. If the production process is short, it may be easier to shift the cost of raw materials straight into the finished goods account, rather than the work-in-process account.
Debit | Credit |
Work-in-process inventory | xxx |
Raw materials inventory | xxx |
Record Inventory Scrap and Spoilage
There will inevitably be a certain amount of scrap and spoilage arising from a production process, which is normally recorded in the overhead cost pool and then allocated to inventory. If these amounts are abnormal, then you would instead charge the abnormal amount to the cost of goods sold (so that they are not carried as an asset). The entry for the former situation is:
Debit | Credit |
Overhead cost pool | xxx |
Work-in-process inventory | xxx |
Record Finished Goods
Once the production facility has converted the work-in-process into completed goods, you then shift the cost of these materials into the finished goods account with the following entry:
Debit | Credit |
Finished goods inventory | xxx |
Work-in-process inventory | xxx |
Allocate Overhead
At the end of each reporting period, allocate the full amount of costs in the overhead cost pool to work-in-process inventory, finished goods inventory, and the cost of goods sold, usually based on their relative proportions of cost or some other readily supportable measurement. The journal entry is:
Debit | Credit |
Work-in-process inventory | xxx |
Finished goods inventory | xxx |
Cost of goods sold | xxx |
Overhead cost pool | xxx |
Sale Transaction Entry
Once there is a sale of goods from finished goods, charge the cost of the finished goods sold to the cost of goods sold expense account, thereby transferring the cost of the inventory from the balance sheet (where it was an asset) to the income statement (where it is an expense). The entry is:
Debit | Credit |
Cost of goods sold expense | xxx |
Finished goods inventory | xxx |
There is also a separate entry for the sale transaction, in which you record a sale and an offsetting increase in accounts receivable or cash. A sale transaction should be recognized in the same reporting period as the related cost of goods sold transaction, so that the full extent of a sale transaction is recognized at once.
That concludes the journal entries for the basic transfer of inventory into the manufacturing process and out to the customer as a sale. There are also two special situations that arise periodically, which are adjustments for obsolete inventory and for the lower of cost or market rule.
Obsolete Inventory Entry
There is likely to be some amount of obsolete inventory arising on an ongoing basis, so it is best to continually charge a small amount to the cost of goods sold and set up a reserve account for obsolete inventory, using the following entry:
Debit | Credit |
Cost of goods sold expense | xxx |
Obsolescence reserve | xxx |
Then, when you locate obsolete inventory and designate it as such, you credit the relevant inventory account and debit the obsolescence reserve account. This approach charges the cost of obsolescence to expense in small increments over a long period of time, rather than in large amounts only when obsolete inventory is discovered.
Lower of Cost or Market Entry
You have to periodically test inventory to see if the market cost of any inventory item is lower than its cost under the lower of cost or market rule. As a result, you may need to reduce the carrying amount of the inventory item to its market value, and charge the loss on inventory valuation expense for the decrease in recorded cost of the inventory. The associated entry is:
Debit | Credit |
Loss on inventory valuation | xxx |
Raw materials inventory | xxx |
Work-in-process inventory | xxx |
Finished goods inventory | xxx |
An interesting point about inventory journal entries is that they are rarely intended to be reversing entries (that is, which automatically reverse themselves in the next accounting period). Instead, the entries are usually one-time events.
Additional entries may be needed besides the ones noted here, depending upon the nature of a company's production system and the goods being produced and sold.
Related Courses
Accounting for Inventory
How to Audit Inventory
How to Audit Inventory
Jump to:
inFlow Inventory
Odoo
Sortly Pro
ZhenHub
Zoho Inventory
Inventory mismanagement is rampant across the industry despite the best efforts of operations managers, employees, and companies. Mismanagement results in canceled orders due to inventory shortages, which in turn, lead to revenue losses.
Deciding to use inventory management software is the right step, but how do you justify the ROI when you’re already suffering losses? The solution is free inventory management software.
But why free software?
First, it doesn’t cost you anything. This provides the ROI justification to implement it. Second, it helps you improve the customer experience you have to offer. The free software automatically tracks your inventory and alerts you in case of shortage. With this automation, you can significantly reduce the chances of order cancellation.
A free inventory management solution will trigger business growth in two ways: you save on software costs and reduce revenue losses due to canceled orders.
To help you find the right free software for your business, we’ve analyzed the reviews and functionalities of about 90 free and open source inventory management solutions listed on Capterra. Of these solutions, we then shortlisted the best five tools.
This article looks at five highly rated free inventory management software options. See the full list of free inventory management software solutions here.
What does “best” mean? Each of the five tools included in this piece has a minimum user rating of 4.0 over the past year. You can find our full methodology here. We’ve sorted this list in alphabetical order.
5 best free and open-source inventory management solutions
1. inFlow Inventory
inFlow Inventory suits businesses of all sizes. Its free version is deployed on-premise and lets you manage up to 100 products and customers. This version includes barcoding, cost management, sales orders, purchase orders, and count sheet functionalities.
inFlow’s unique selling point (USP) is its payments tracking functionality, which provides real-time details of all the completed and pending payment transactions.
Users can upgrade to two paid plans--Regular and Premium. In addition to the features in the free version, these plans include separate user logins, bills of materials (BOM), work orders, and product serial numbers management.
Pros | Cons |
---|---|
Capterra reviewers found the product’s inventory forecasts helpful in curbing the instances of over-orders and inventory shortages. They also said that eCommerce integrations, such as Magento and Shopify, helped them manage their online inventory. | Users note that the lack of accounting integration is a disadvantage. They have to export transaction data from inFlow and manually add it to their accounting tool. Some reviewers also feel that the product’s invoice templates are outdated. They noted that the templates need an upgrade with new layouts and formats. |
Cost to upgrade: $399 per user for the Regular plan.
Highly rated by: In 2018-2019, 82% of inFlow’s reviewers worked in small businesses (with less than 200 employees). These businesses operate in industries such as retail, electrical and electronics manufacturing, and construction.
Mobile apps: Android, iOS
Inventory tracking in inFlow
2. Odoo
Odoo is an open source enterprise resource planning (ERP) solution for businesses of all sizes.
But, what is an ERP solution doing in this list?
Despite Odoo being an ERP tool, users can download and access its inventory module, using it as a standalone inventory management solution. Odoo’s USP is that it is a full suite ERP, making the product suitable for your CRM, project management, and business management needs.
Odoo is available for free if you implement only the inventory management module. Users need to pay for other apps such as CRM and project management.
Pros | Cons |
---|---|
Capterra reviewers found Odoo’s accounting integration helpful as it eliminates the time needed to manually move the transaction data to the accounting system. They also said that Odoo’s community forum helped them get answers to the questions they posted on the forum. | Some users said that the installation and customization require basic knowledge of the Python programming language. Some also reported that the lack of proper product documentation was a hurdle during product setup and training. |
Cost to upgrade: The inventory module is completely free.
Highly rated by: In 2018-2019, about 82% of Odoo’s reviewers were from small businesses. They were from industries such as software technology, IT services, and retail.
Mobile apps: Android, iOS
Warehouse dashboard in Odoo (Source)
3. Sortly Pro
Sortly Pro is a cloud-based inventory management solution for businesses of all sizes. Its free plan supports one user and lets you manage up to 100 transaction entries per month.
Sortly Pro’s USP is its product tagging and cataloging functionality that lets users create product catalogs with up to eight photos for each item.
If you want to manage more than 100 entries per month, upgrade to the Advanced or Ultra plans. In addition to the features offered in the free version, these plans offer QR code tagging and scanning, user activity tracking, document management, and customized branding.
Pros | Cons |
---|---|
Capterra reviewers find Sortly Pro’s mobile app helpful in remotely tracking as well as managing inventory and re-orders. They also said that the product’s barcode and serial number functionalities helped them track inventory movement more efficiently because they were able to implement barcodes easily. | Some users noted that once you upgrade the product, the total cost increases sharply when you add more users. They said that the product’s inventory history functionality provides a list of records that is complex and difficult to understand. They feel that this functionality could be made easier to understand. |
Cost to upgrade: The Advanced plan starts at about $40 per month for up to three users.
Highly rated by: In 2018-2019, about 80% of Sortly Pro’s reviewers were from small businesses. Most of these reviewers came from the design, construction, and retail sectors. Vps avenger v1 2 2 vst mac.
Mobile apps: Android, iOS
Managing product catalogs in Sortly Pro
4. ZhenHub
ZhenHub is a cloud-based logistics and inventory management solution for small and midsize businesses (SMBs). Its free version offers inventory tracking, shipment tracking, and warehouse management.
ZhenHub’s USP is its shipping management functionality that integrates with multiple shipping solutions such as DHL and FedEx. It lets you schedule, manage, and track orders from these providers.
The free version lets you manage one warehouse and supports up to 50 online orders per month. If you want to manage more orders per month or add more warehouses, you can upgrade to the Starter, Standard, or Professional plans.
Pros | Cons |
---|---|
Capterra reviewers found the Shopify integration helpful as they were able to manage their inventory and shipping for website orders with ease. They also found the product’s features easily customizable as per their business needs. | Some users said that they experienced a lag when using the shipping tracking functionality. They said that it can sometimes take time for the shipping status to sync up with the shipper’s account. Some also mentioned that as ZhenHub charges both sender and receiver fees for international transfers, it can make billing costly. |
Cost to upgrade: $29 per month for the Starter plan.
Highly rated by: In 2018-2019, all of ZhenHub’s reviewers came from small businesses in the apparel and fashion as well as consumer electronics sectors.
Mobile apps: Not available.
Order tracking in ZhenHub (Source)
5. Zoho Inventory
Zoho Inventory is a cloud-based inventory and warehouse management solution for SMBs. Its free version lets you manage 20 online orders, 20 offline orders, 12 shipments, and 1 warehouse per month. This version also lets you select and manage shipping providers for your orders.
Workflow management functionality is the free version’s USP. It triggers an alert as soon as the stock dips below the critical level and lets you re-order the stock.
Besides the Free plan, users can upgrade to three paid plans--Basic, Standard, and Professional. These plans offer serial number tracking, batch tracking, a higher number of orders per month, composite items management, and all the free features.
Pros | Cons |
---|---|
Capterra reviewers find the product’s sales order (SO), purchase order (PO), and expense tracking functionalities helpful in automating inventory procurement. They also noted that Zoho’s shipping management tracking functionality helped them schedule and track the location of inventory items more efficiently. | A few reviewers from manufacturing companies found the lack of a bill of material (BOM) functionality to be a disadvantage. They were forced to use a time-consuming workaround in place of this feature. Some users also reported issues in syncing data when managing eCommerce orders. |
Cost to upgrade: $49 per month for the Basic plan.
Highly rated by: In 2018-2019, 98% of Zoho Inventory’s reviewers were from small businesses. Most of these reviewers belonged to the retail, electrical and electronics manufacturing, consumer goods, and IT services industries.
Mobile apps: Android, iOS
Shipping management in Zoho Inventory
The final decision: Which free inventory management solution to invest in?
Librarian Pro 5 1 1 – Complete Personal Inventory Systems
After reviewing this list, the next step is to find out which one of these products will best fit your business needs. Here are the steps to help you do just that:
- Shortlist solutions based on the number of monthly orders allowed in the free plan.
- Review this features list and select the features you’ll need in your business. Shortlist those products that offer all the essential features you need.
- Decide an annual budget for the inventory management software. Select products that fit within your budget, so that you can afford all the upgrades.
If you’ve used, or are currently using, a free inventory management system that works well for you, please let us know in the comments section below.
For more information on inventory management software, you can also read the following reports: |
Methodology
This article was updated Aug. 12, 2019. Products considered for this article fulfill the following criteria:
1. It must be free
For the purposes of this article, we classified a product as free if:
- It offers a free, standalone version of the software.
- It is not a trial version of the software where you must purchase a product version after a limited amount of time.
2. Meet fit inventory management software defiition
The products that met the above criteria were then evaluated against our inventory management software definition: Inventory management software helps businesses track and manage product location, item details, and stock level as well as report on trends to inform forecasting decisions, so that it reduces the costs of holding overstock and missed revenue from running out of stock.
This check verified the basic inventory management software capabilities and appropriateness for the category. A product was classified as inventory management software if it contained all the core features—inventory information management, product identification, and inventory optimization.
3. Have minimum number of reviews
Software that met the market definition also needed a minimum of 10 reviews published on the inventory management software page between June 12, 2018 and June 11, 2019. During this period, the product’s overall rating aggregated over the past year should be higher than 4.0.
Disclaimers
The content in this piece provides opinions and points of view expressed by users and does not represent the views of Capterra.
Librarian Pro 5 1 1 – Complete Personal Inventory System Template
Looking for Inventory Management software? Check out Capterra's list of the best Inventory Management software solutions.