How consignment works
With consignment, a supplier places stock with you but keeps ownership of it. You sell it as normal. You owe the supplier only for the units that sell, and you send back what doesn't sell. In SKU.io, the payment term on the purchase order decides whether a purchase is a consignment.
The payment term is the switch
A payment term with Consignment (pay on sale) turned on makes every purchase order that uses it a consignment purchase order. There's no separate consignment flag on the purchase order itself. The term carries two schedules that are easy to mix up:
- Settlement frequency is how often a settlement bill is cut for the units that sold: On demand, Weekly, Biweekly, Monthly or Quarterly.
- Net days on the same term set when each settlement bill is due, counted from the settlement date, not from the purchase order date.
A term named "Consignment — Monthly, Net 30" therefore means: once a month, bill the supplier's sold units, and pay that bill 30 days later.
Consignment terms are purchasing-only. Turning consignment on sets Applies to to Purchasing.
Some agreements are called consignment but are really a purchase: the stock can't be returned, the payment is fixed, and you carry the risk. For those, tick Treat as purchase (capitalize as owned inventory) on the term. Purchase orders using it behave like normal purchases: the stock is yours at receipt and you owe for it at receipt.
The lifecycle
| Stage | What happens to stock | What happens to cost and money |
|---|---|---|
| Receive | Units land in the warehouse you receive into and become available to sell. Each product's On Hand shows how many of them are consigned. | Nothing is posted to your books. The units carry the purchase order's unit cost, but they aren't counted in your inventory value. |
| Sell | The sale ships from the shelf like any other. | Cost of goods sold is recorded at the consignment cost, and the same amount becomes a liability to the supplier. |
| Settle | No stock moves. | A settlement bill is raised for the sold, not-yet-settled units at their consignment cost. It clears the liability and becomes an amount you owe the supplier. |
| Pay | No stock moves. | You pay the settlement bill like any other supplier bill. |
| Return unsold | The unsold units leave your stock and go back to the supplier. | Nothing is posted, and no credit is created, because you never owed for them. |
Which units count as consigned
Stock you receive against a consignment purchase order is consigned. Sales use your stock in the usual first-in, first-out order. So if the same product also has stock you own in the same warehouse, the older units sell first. Consigned units only count as sold once a sale actually uses them. To keep consigned stock apart, receive it into its own warehouse.
Where consigned stock is excluded
Consigned units are counted in On Hand, Stock and Available, because you can sell them. They're excluded from the value of the stock you own. Inventory → Consignment shows them in an Off-Balance-Sheet Memo: the Consigned Inventory Value, an equal Received-Not-Billed Obligation, and a Net Balance-Sheet Impact of zero. The memo is a disclosure only and is never posted to your books.
When a consignment purchase order is done
A consignment purchase order is never marked as invoiced the normal way, because it's settled bit by bit as stock sells. Its Consignment panel shows its own status instead:
- Not settled: nothing has been settled yet.
- Partially settled: some units are settled, but received stock is still unsold or unsettled.
- Fully settled: every received unit has either sold and been settled, or been returned. The purchase order then closes.
Settlements run on a schedule
For each consignment term, SKU.io raises settlement bills on the term's frequency: weekly on Mondays, biweekly on the 1st and 15th, monthly on the 1st, and quarterly on the first day of each quarter. Terms set to On demand never settle automatically. You can always settle early from the purchase order. A scheduled run only bills what's still unsettled, so it never bills a unit twice.
Aging alerts
Unsold consigned stock that sits too long is a sign to send it back. A daily check flags stock older than your threshold, 90 days by default, and emails your admins. You can also have the check return flagged stock to the supplier automatically. That's off by default because a return can't be undone.