Reference

Consigned stock, and
what your system should say

Consignment is stock that sits in one party's building and belongs to another. The goods move first and the ownership moves later, usually at the moment of sale, and that gap is the whole of it.

It's an ordinary commercial arrangement and an awkward one to hold in software, because stock systems are built on the assumption that what's on your shelf is yours. Consignment breaks that assumption in one direction or the other, and many systems have no field for the difference.

It runs in two directions, and the word doesn't distinguish them

The same word describes two opposite arrangements. Which one you're in comes first, because the accounting, the risk and what the stock system has to say are different in each.

You hold stock somebody else owns

A supplier's goods in your warehouse or on your shop floor. You can sell it, you didn't buy it, and you owe for it once it goes. It isn't your asset and it shouldn't sit in your stock valuation, but it has to sit in your availability, because you can sell it today.

When a system can't tell the difference, this direction flatters the balance sheet by accident: stock value goes up, nothing was bought, and margin reads wrong until somebody reconciles it by hand.

Somebody else holds stock you own

Your goods in a retailer's shop, a distributor's warehouse, a marketplace's fulfilment centre, or with a 3PL. It's your asset and your risk, and it's nowhere you can count it.

The exposure runs the other way: stock you own is invisible to your own availability, so you either understate what you can sell or you sell it twice, depending on whether anything feeds you the other party's numbers, and how often.

Four moments, and only one of them is the sale

A consigned unit passes through these in order. Every argument about consignment (who insures it, whose stocktake it appears on, when it becomes revenue, who pays when it's damaged) comes down to which of the four the contract says title moves at.

1 — Dispatch

Goods leave the owner. Nothing's been sold and nothing's been bought. If a system books this as a sale, every figure downstream is wrong from here, and it's a common default, because dispatch is the event the warehouse naturally raises.
2 — Receipt into the holder's building

Now it's physically present somewhere it isn't owned. Many stock systems can't represent that state, and the workaround (a separate location, a flag, a second SKU) is a decision to make on purpose rather than discover.
3 — Sale to the end customer

Usually where title passes, and usually twice in the same instant: owner to holder, holder to customer. Two transactions, one event, and if only one of them is recorded the two parties' books stop agreeing from that day.
4 — Settlement, or return

The holder pays for what sold, and unsold goods go back or roll into the next period. The reconciliation runs against a statement the other party produces, which is why consignment quietly becomes a monthly manual job wherever it wasn't designed for.

Where title passes and how VAT follows it are contract and tax questions. They belong with the agreement and whoever advises on it. A system's job is to represent what the contract says, which it can't do until somebody has read the contract and said which moment title passes at.

Where it goes wrong

All four share one root: a system holding one number for stock when consignment needs two, ownership and availability, which cover different units.

The valuation includes what you don't own

Held consignment stock counted as an asset. The stock figure the ledger takes at period end is overstated by whatever's on the floor unsold, and nothing in the software objects, because to the software it's just stock.

Your own stock is invisible to your own channels

Stock you own sitting in a third party's building, with no feed back. You can't sell it because you can't see it, or you sell it twice because your only view is a spreadsheet somebody emails weekly.

The stocktake finds goods nobody can classify

A count that can't separate owned from held produces a false variance, and a fortnight spent investigating a discrepancy that was never real. It repeats at every count until the flag exists.

Two parties' books stop agreeing

The settlement statement and your own sales record diverge, usually over returns and timing, and the reconciliation becomes a monthly negotiation. It's the same shape as the payouts-against-orders problem on the accounting reference, with a trading partner in place of a payment processor.

All four lead to one system requirement: ownership and availability have to be recorded separately, per unit and per location. Which system holds that, and the four numbers every candidate needs to show, are on stock control software; which system decides what a consigned unit is promised to is covered by the order layer.

Getting consignment right on Shopify Plus

Consignment works when ownership is modelled separately from availability, and when the settlement with the supplier reconciles from the same record the storefront sells from.

We design that before any product is chosen, because the product has to be able to express it, and the questions above decide which ones can.

If consignment is already in your operation, the systems review starts with two things: which moment your contract says title passes at, and whether anything in your stack can hold ownership separately from availability.

Start the systems review

Tell us what you need

What the systems are doing now, and what you need them to do. We'll tell you whether it's a platform problem or something cheaper.

Consigned stock, and what your system should say