Accurate inventory management and accounting compliance through structured ERP classification
Inventory plays a critical role in every product-driven business — not just operationally, but also financially. Mismanagement of stock can lead to inaccurate reporting, operational bottlenecks, and even legal consequences related to tax and compliance.
Tuhund, a comprehensive enterprise ERP system, approaches inventory management with a structured and intelligent classification system. At a high level, Tuhund divides inventory into two primary categories: Actual Stock and Booked Stock. This classification not only supports operational efficiency but also ensures strict adherence to accounting best practices and legal obligations, including income tax compliance and global financial standards like IFRS and GAAP.
Actual Stock: Physical Inventory On Hand
Actual Stock refers to the inventory physically available in your organisation's warehouses. This includes items that are not yet committed to any job, order, or internal use — and are thus available for immediate sale, transfer, or consumption.
In Tuhund, this stock is reflected as part of your available inventory and can be used freely for:
- Sales orders
- Production processes
- Internal issues
- Inter-warehouse transfers
Booked Stock: Inventory That Is Reserved or Committed
Booked Stock represents inventory that is still physically present (or legally under your ownership) but has already been reserved or committed for a particular purpose. It is not considered available for general use or sale.
This includes stock:
- Sent on demo or approval without invoice
- Sent on delivery note, pending conversion to invoice
- Allocated for production or manufacturing orders
- Allocated for service operations
- Reserved for indent orders or custom packaging
Not All Booked Stock Requires Manual Release
While booked stock is typically locked from general sale or usage, not all of it needs to be manually released before it is acted upon. Tuhund intelligently handles multiple scenarios:
- Stock sent on delivery note for sale - does not require manual deallocation; it can be directly invoiced, and the system transitions it from booked to sold automatically.
- Stock allocated for internal purposes - such as production, service tasks, testing, or R&D - does not need to be released manually. Instead, it is directly consumed as part of a valid process.
In these cases, the system treats the stock as written off through consumption, ensuring that the value is removed from inventory appropriately and booked as production cost, service cost, or any other relevant expense head.
Only in cases where the booked stock is no longer needed or is being repurposed for sale must it be manually released and returned to available stock.
Financial Treatment and Compliance with International Standards
In Tuhund, the financial value of inventory is calculated as:
Actual Stock + Booked Stock
This total is recognised as a current asset on the balance sheet and aligns with international accounting standards:
IFRS (International Financial Reporting Standards)
According to IFRS IAS 2 (Inventories):
"Inventories shall be measured at the lower of cost and net realisable value. Inventories include assets held for sale, in production, or in the form of materials to be consumed."
Tuhund ensures that even unbilled or demo stock is recognised as an asset in compliance with IFRS.
GAAP (Generally Accepted Accounting Principles)
Under US GAAP, inventory remains on the books until the risks and rewards of ownership transfer (typically at the point of sale). Premature removal of such stock can constitute fraudulent reporting.
Tax Compliance — Especially Income Tax
Incorrectly removing booked stock from your books before it's invoiced or consumed results in:
- Inflated Cost of Goods Sold (COGS)
- Understated closing stock
- Reduced net profit
- Illegal reduction of taxable income
This is considered income tax evasion and can lead to penalties and legal action.
Tuhund ensures that the financial value of all inventory is maintained correctly until it is invoiced, consumed, or written off — fully complying with income tax laws.
Context-Specific Visibility in Tuhund
Tuhund dynamically adjusts what stock values are visible based on user role and module:
| Module / Context | Stock Values Displayed |
|---|---|
| Inventory Module | Actual Stock, Booked Stock, and Total Stock |
| Sales Module | Only Available Stock (Actual - Booked) |
| Production / Services | Booked stock as per task requirements |
| Finance & Accounting | Total inventory value with breakdowns |
Built-in Controls for Stock Integrity
Tuhund enforces control over stock movements. Booked stock cannot be used or sold unless:
- It is manually released
- It is invoiced automatically (in the case of delivery notes)
- It is consumed internally in a valid operational flow
This ensures that physical stock, system records, and financial values always remain aligned.
Summary
Tuhund's stock classification system is designed for operational clarity, financial precision, and full legal compliance. By classifying inventory as Actual and Booked, and maintaining financial value until proper disposition, it ensures:
- Real-time stock visibility
- Accurate financial statements
- Compliance with IFRS, GAAP, and Income Tax regulations
- Audit-ready, transparent reporting
In short, Tuhund provides the flexibility businesses need, backed by the control that regulators demand.
