Consignment: selling goods owned by another party

In consignment, the goods owner and the selling business are different parties. The customer can pay the full selling price while the seller retains a commission and owes the rest to the consignor. This is a settlement relationship, not an insurer sharing the customer's bill.

DNA Consignment policies identify the consignor through a supplier record and its required accounts. Applying the policy on a sale determines the amount owed to that owner. Supplier Payment provides Consignor settlement to select the resulting payables.

The ownership relationship

In an ordinary resale arrangement, the business purchases goods and sells them on its own account. In a consignment arrangement, another party retains the ownership relationship described by the agreement while the selling business earns a commission or agreed share.

This changes the settlement logic. The customer can owe the seller the full selling price, while the seller separately owes the consignor an amount. The consignor is not simply another customer contributing to the same receivable.

A practical example

A tax-free teaching example sells an item for 1,000 with a 15% selling commission. The seller retains 150 and owes 850 to the consignor under the assumed agreement. The customer's debt is still the full 1,000. Treating the 850 as a customer discount would misstate both relationships.

The USD 150 commission and USD 850 consignor amount describe how the sale proceeds are shared under the assumed agreement. They do not reduce the customer's USD 1,000 bill. A customer receipt and a payment to the consignor are distinct financial events.

How DNA represents the arrangement

DNA's consignment policy identifies the consignor through the supplier relationship and required account mappings. Applying the relevant policy to the sale establishes the resulting owner settlement. Consignor settlement in supplier payments addresses that payable.

Policy validity and the applicable commission basis matter. A percentage of the selling price differs from a percentage of another agreed base. Additional charges, returns, and credits can also affect the correct settlement, so the agreement needs to define how they are treated.

Returns and unsettled transactions

Suppose the customer returns the item before the consignor has been paid. The commercial correction may affect both the customer's balance and the amount due to the owner. Settling the original consignor amount without considering the return could overpay the owner.

If the owner has already been paid, the correction still needs a clear account of the subsequent adjustment. The history should explain the original sale, customer correction, commission effect, and owner settlement position.

Keeping the relationships understandable

Consignment requires visibility of three perspectives: the customer's obligation, the seller's earned amount, and the consignor's entitlement. Confusing one with another can misstate revenue interpretation, customer balances, or supplier settlement.

DNA's policy and settlement structures help represent those perspectives. Their value depends on an accurately defined agreement and consistent treatment of later events. A clear record allows the business to explain both why it collected the customer's full amount and why part of that amount belongs to another party.