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Adjustment Codes

Adjustment codes (also called reason codes) document why inventory quantities change. The system requires a reason code for all inventory adjustments, creating an auditable trail for reporting, variance analysis, and compliance.

Access: System → Definitions → Positive/Negative Adj. Codes

Overview

Every time inventory increases (receiving) or decreases (issuing), the system assigns a reason code. Some codes are automatically assigned by the system based on the transaction type, while others must be selected manually for direct adjustments.

Two Types of Codes:

  • Positive Adjustment Codes: Explain inventory increases (receipts)
  • Negative Adjustment Codes: Explain inventory decreases (issues)

Positive Adjustment Codes

Used when receiving inventory or increasing on-hand quantities.

System-Assigned Codes:

  • PO Receipt: Purchase order receiving (automatic)
  • Appointment Receipt: Receiving against appointments (automatic)
  • WO Return: Work order material returns (automatic)
  • SO Return: Shipping order returns (automatic)

Common Manual Codes:

  • Physical Count Correction: Inventory found during cycle counts
  • Found Inventory: Items discovered during warehouse organization
  • Transfer In: Receipts from inter-warehouse transfers
  • Production Overrun: Excess items from manufacturing
  • Customer Return: Goods returned by customers (note: consider using the Orders module for full return processing)
  • Vendor Credit: Items returned from vendor (note: consider using the PO module for proper vendor credit tracking)

Negative Adjustment Codes

Used when issuing inventory or decreasing on-hand quantities.

System-Assigned Codes:

  • PO Issue: Purchase order fulfillment (automatic)
  • SO Issue: Shipping order fulfillment (automatic)
  • WO Issue: Work order material issue (automatic)

Common Manual Codes:

  • Physical Count Correction: Inventory shortage discovered during cycle counts
  • Damaged: Items damaged and removed from inventory
  • Obsolete: Items scrapped or disposed of
  • Lost: Missing inventory
  • Transfer Out: Transfers to other warehouses
  • Samples: Items used for samples or demos

Why Reason Codes Matter

Reporting and Analytics:

  • Filter inventory reports by reason code to analyze patterns
  • Track “How many items were found during cycle counts this quarter?”
  • Identify high-frequency adjustment categories that may indicate process issues

Variance Analysis:

  • Identify trends in physical count corrections
  • Separate planned transactions (POs, WOs) from unexpected adjustments
  • Track accuracy improvements over time

Financial Reconciliation:

  • Separate purchase receipts from manual adjustments for accounting
  • Provide backup documentation for auditors
  • Support month-end and year-end closing processes

Process Improvement:

  • Track root causes of inventory discrepancies
  • Identify training needs or system configuration issues
  • Support continuous improvement initiatives

Compliance:

  • Document inventory changes for regulatory requirements
  • Provide audit trail for ISO, FDA, or other certifications
  • Meet internal control requirements

Creating Custom Codes

Organizations can create custom reason codes for specific business scenarios.

To Create a Positive Adjustment Code:

  1. Navigate to System → Definitions → Positive Adj. Codes
  2. Click “Add New Positive Adjustment Codes”
  3. Enter a descriptive name (e.g., “Warranty Replacement Receipt”, “Demo Equipment Return”)
  4. Add notes explaining when staff should use this code
  5. Specify which warehouses can use this code (or leave blank for all)
  6. Click “Save”

To Create a Negative Adjustment Code:

  1. Navigate to System → Definitions → Negative Adj. Codes
  2. Click “Add New Negative Adjustment Codes”
  3. Follow the same process as positive codes

Best Practices

Naming Conventions:

  • Use clear, descriptive names that indicate the reason
  • Consider using prefixes for grouping (e.g., “Return - Customer”, “Return - Vendor”)
  • Avoid abbreviations that may be unclear to new users

Code Management:

  • Create specific codes for scenarios you want to track separately in reports
  • Avoid generic codes like “Miscellaneous” or “Other” that hide important data
  • Document code usage in staff training materials
  • Deactivate obsolete codes rather than deleting them to preserve historical data

Usage Guidelines:

  • Train staff on when to use each code
  • Review reason code usage quarterly to identify patterns
  • Investigate high-frequency manual adjustments that may indicate upstream issues
  • Use system-assigned codes whenever possible by using the appropriate module

Reporting with Reason Codes

Most inventory reports include filters for reason codes:

Available Reports:

  • Positive Adjustment History (by Amount, by Serial/Lot)
  • Negative Adjustment History (by Amount, by Serial/Lot)
  • Complete Adjustment History
  • Stock Adjustments by User
  • Adjustment Code Usage Summary

Common Analyses:

  • Receipt patterns by type
  • Issue patterns by type
  • Physical count accuracy trends
  • User-specific adjustment patterns
  • Warehouse-specific adjustment trends

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