Consignment inventory is stock that sits in a store but still belongs to the supplier until it sells. The store displays it and sells it, and only owes the supplier money once a customer buys. Whatever does not sell can usually go back to the supplier. Both sides keep their own records, and those records need to agree.
It is the stock side of consignment selling. This guide covers who owns the goods, how both sides keep records, and what goes wrong when nobody keeps count.
What defines consignment inventory
Most consignment agreements share the same features:
- Ownership stays with the supplier. Moving the goods to the store does not transfer title.
- Payment follows the sale. The store pays for what sold, usually at agreed intervals such as weekly or monthly.
- Unsold units can be returned. This should be written into the agreement.
- The store earns a margin. Either a commission or a markup on each unit sold.
- Two sets of numbers must match. What the supplier believes is in the store, and what is really on the shelf.
Who owns it and who carries the risk
In general terms, the supplier owns the goods until the sale, so the supplier carries the risk that they never sell. The store has the goods in its care and typically answers for theft, loss or damage that happens on its premises.
How the risk is actually split depends on the agreement. Spell out who pays for a damaged, lost or expired unit before the first delivery. Most disputes come from a point nobody settled up front.
A worked example
Say you make candles and leave 60 with a store at a wholesale price of 10 each. These numbers are only an illustration.
- You deliver 60 candles with a delivery note. They are still yours.
- At month end the store counts 38 on the shelf.
- One arrived broken and is returned to you: 1.
- Sold = 60 - 38 - 1 = 21 candles.
- The store owes you 21 x 10 = 210, before any commission it keeps.
Notice that you never invoiced the store for the 60 candles. You only bill for the 21 that sold. The 38 on the shelf remain your stock. When you restock, you add the new delivery and repeat the same arithmetic at the next count.
Record keeping on each side
The supplier
You need to know at any moment how much is in your warehouse and how much sits in each store. Keep:
- A delivery note for every drop-off, with product, quantity and price.
- A running list of expected stock per store.
- The result of each count and the gap against what you expected.
- Statements sent and payments received.
The store
The store should keep consigned goods separate from its own stock, on paper and ideally on the shelf. Keep the delivery notes, log each sale of consigned items so the amount owed is always known, and report damaged or returned units promptly.
The general accounting idea
Broadly, until the goods sell, the supplier keeps them in its own inventory even though they are in the store, and the store does not record them as its own purchases. When a sale happens, the supplier recognizes the revenue and the store recognizes what it owes the supplier.
The exact treatment depends on your country’s rules and accounting standards, so confirm it with your accountant before you set up your books.
Common problems
- Shrinkage. Units disappear through theft, misplacement or counting errors. Without regular counts, no one knows when it happened.
- Outdated counts. If the last count was three months ago, you cannot tell what sold or when to restock.
- Expired or damaged goods. Agree who removes them and who bears the cost.
- Price mismatches. The store charges one price while your list says another.
- Slow payment. Without clear statements, invoices drift.
The guide to tracking consignment stock shows how to prevent each of these step by step.
Managing consignment across many stores
With one store, a spreadsheet often does the job. With five or ten, each location has its own product list, prices, count schedule and open balance, and mistakes creep in when that information lives in separate files.
The work grows with every store you add, so a few habits matter more than any single tool:
- One master product list, with a price list per store.
- The same count schedule for every location.
- A single record of deliveries, returns and payments.
- A statement for each store at the close of every period.
- A short note on every difference, so patterns (one store, one product) become visible.
For the practical side of leaving goods and agreeing terms, read how to sell products on consignment to stores.
Frequently asked questions
What is consignment inventory?
It is stock held by a store that still belongs to the supplier until it sells. The store pays only for what it sells.
Who records consignment inventory, the supplier or the store?
Both keep records, for different reasons. The supplier carries it as its own inventory. The store tracks it separately to know what it owes and what it can return. The accounting treatment depends on your country, so check with your accountant.
What happens to consignment stock that does not sell?
It normally goes back to the supplier under the agreed terms. Set a deadline and decide who pays for the return trip.
How do I manage consignment stock across multiple stores?
Use one product list, a price list per store, a regular count schedule and a statement per store each period. A spreadsheet works for a few locations, and a dedicated tool helps as the number grows.
Keeping it organized
If you supply several stores, COMPA lets you register deliveries to each store, collect counts through a simple link (stores do not need to create an account), and see delivered, sold and returned units reconciled, with account statements and records of payments and replenishment.