Consignment Inventory
Definition
Goods placed with a retailer who pays you only after they sell. Until then, the inventory still belongs to you and stays on your balance sheet.
Want a deeper explanation?
Consignment can open doors to retailers who will not take inventory risk, but your cash stays tied up until the product sells.
It needs its own inventory location so you always know what is out at each consignee. Watch for: consigned goods recorded as sales when shipped, which overstates revenue and leaves inventory unaccounted for.
Example
You ship $15,000 of product to a boutique on consignment. You record no sale until the boutique reports $4,200 sold, then invoice for that amount.