How to Enable inventory?

Quick Summary

Inventory management in SIM tracks the quantity of physical goods a business holds at any point in time. Stock levels update automatically — increasing when purchases are recorded and decreasing when sales (invoices) are made. The feature also supports manual adjustments and low-stock alerts.

What Is This Feature

What It Is

Inventory management in SIM tracks the quantity of physical goods a business holds at any point in time. Stock levels update automatically — increasing when purchases are recorded and decreasing when sales (invoices) are made. The feature also supports manual adjustments and low-stock alerts.

When To Use This Feature

When & Who

Relevant only for businesses dealing in physical goods — shops, wholesalers, distributors, manufacturers. Not applicable to pure service businesses. Should be enabled as part of initial app setup.

What Affects Inventory

Step-by-Step Flow

🔁 Flow — Enabling Inventory

1. Go to Settings → Inventory Management → toggle on.
2. Enable Low Inventory Alert if you want to receive notifications.
3. Select the inventory valuation method (see Concepts below).
4. When adding or editing a product, toggle Enable Product Inventory and set opening stock and minimum alert level.

Fields Explanation

Key Fields

Optional Settings

Optional Sub-Feature

• Physical Stock-Take:

At the end of the day, there may be differences between the inventory calculated by the app and the actual physical stock in your warehouse. This feature allows you to correct such differences by adding Reconciliation Edits to the product list along with their current stock.

Also add Reconciliation Edit in the Field References section of Inventory Management.

Underlying Concept (Accounting / Logic / Calculation)

Concepts

Why inventory valuation matters: The method chosen affects the reported cost of goods sold (COGS) and therefore the reported profit. It also affects the balance sheet value of unsold stock. This has implications for financial statements and, in some jurisdictions, tax calculations.

Reorder Point / Minimum Alert Level: The stock level at which a business should place a new order to avoid running out. It accounts for the time it takes to receive new stock and the expected demand during that lead time.

Inventory Valuation Methods

1. Actual Average Buy Rate (Weighted Average Cost) — Recommended

Calculates the average cost of all units purchased over time. When an item is sold, its cost is recorded at this average.

Example: 10 units bought at ₹100, then 10 more at ₹120. Weighted average = (10×100 + 10×120) / 20 = ₹110 per unit Every unit sold is costed at ₹110 regardless of which batch it came from.

Best for: Most businesses. Smooths out price fluctuations over time.

2. FIFO (First In, First Out)

Assumes the oldest stock purchased is always sold first.

Example: 10 units at ₹100 (Batch 1), then 10 units at ₹120 (Batch 2). When selling, cost is taken from Batch 1 first (₹100 each), then Batch 2 (₹120 each).

Best for: Perishable goods (food, medicine, cosmetics) where older stock must be sold before expiry.

Financial effect: In a rising-price environment, FIFO results in a lower cost of goods sold → higher reported profit compared to average cost.

3. Fixed Buy Rate

Uses a single manually defined cost price regardless of actual purchase price fluctuations.

Example: Fixed rate set at ₹100. Even if you later buy at ₹130, cost is still recorded at ₹100.

Best for: Businesses with stable, predictable purchase prices who prefer simplified cost tracking.

Interaction With Other Features

Interaction with Other Features (Dependencies & Side Effects)

• Reorder Management:

This feature allows you to generate purchase orders based on the minimum stock level set when enabling inventory for a product.

• Batch Upload (Inventory Data):

You can update the existing product list or add inventory-related data during product creation using batch upload.

• Sales Return:

If a sales return is generated from an invoice (i.e., goods are returned by the customer), the corresponding sales return document will update the inventory.

• Cost of Goods Sold (COGS):

COGS is directly related to the inventory valuation method used.

Alternate Terms

Alternate Terms

Video Tutorial Embed

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