Goods in transit at the count date: delivery terms and risk transfer

On the cut-off date there are lorries on the road, containers at a terminal and parcels with the forwarder. The goods are paid for or ordered, but they are not in the warehouse, and no count team can count them. Do they already count as stock? This is not a counting question but a question of contract and accounting. The warehouse cannot answer it, but it can make sure that accounting has the right documents when it decides. This article shows how. It gives no legal classification. How goods in transit are to be treated is something to clarify with your auditor and your tax adviser.

Why the count does not answer the question

The count team sees only what stands in the warehouse. Whether a delivery that is still on its way already counts as the company's stock depends on the contract and the agreed delivery terms, which are often named with abbreviations from the Incoterms. Among other things, what matters is where and when risk and title pass. The two need not coincide, and the answer can differ from delivery to delivery. There is therefore no blanket rule, and the decision belongs not in the warehouse but in accounting.

In addition, the cut-off date is not the end of the story. If the goods arrive two days later, they appear as a goods receipt in the new period, while the invoice may already have been posted in the old one. Such shifts are the reason why the allocation should be documented in advance.

The checklist for the cut-off date

1. Draw up a list of open deliveries: orders that have been dispatched but not received by the cut-off time. Sources are purchasing, the forwarder and shipment tracking.
2. Assemble the documents for each delivery: contract or order with the delivery terms, dispatch date, invoice date, consignment note, loading date, arrival date and customs status.
3. Have accounting fix the allocation to the cut-off date in writing, agreed with the tax adviser, for each delivery or for each group of identical delivery terms.
4. Do the same for outgoing goods: goods that are loaded but have not yet reached the customer.
5. File the list as an annex to the inventory record.

A fictional example of how the list is structured: on the cut-off date six deliveries are on their way, together EUR 148,000. Two have been loaded at the supplier (EUR 52,000), three are to be handed over only at the warehouse in Tashkent according to the contract (EUR 71,000), and one is waiting at the border for clearance (EUR 25,000; 52 + 71 + 25 = 148). How each of these lines is treated on the cut-off date is decided by accounting, not by the warehouse manager.

Typical mistakes

• The invoice is posted, the goods are not there. Without a note "in transit" they are missing from every count.
• A delivery arrives on count day. If it is posted at once and put on the shelf, it is unclear whether it belongs to the cut-off date. Decide beforehand whether goods receipts are blocked or recorded separately during the count.
• Dispatch documents, consignment notes and confirmations are missing when the auditor asks when the goods were loaded.
• Outgoing goods to customers are forgotten because the focus is on incoming deliveries.
• Consignment stock or goods held by a service provider appear on no list.

Questions for the tax adviser and auditor

• By what criteria do we allocate goods in transit to the cut-off date: contract, consignment note, invoice or something else?
• Which documents must be available for each delivery, and how long do we keep them?
• How do we treat ancillary costs such as freight or customs in this context?
• Does the same approach apply to outgoing deliveries?
• By when and in what form should the allocation be documented?

In short

The warehouse counts what is there and supplies the facts about what is on its way. The decision is taken by accounting. AuditMaster records in the inventory record which goods were not in the warehouse at the cut-off time and reconciles count result and book stock so that such positions stay separate from genuine differences.