Rules for using the Inventory functionality in Zoho

We've been struggling with the Zoho Inventory functionality for over two years. After much discovery, I thought I'd publish our findings on Zoho computes product quantities and how changes to Sales Orders, Invoices and Purchase orders affect product quantities.

Zoho Rules to Maintain Inventory

Never change the default status's of Sales orders, Invoices or Purchase Orders. The default status are Created, Approved, Delivered, Cancelled.
Never delete a Sales Order, Invoice or Purchase Order. Just mark their Status as Cancelled.
When you create a Sales Order, set Status to Created or Approved.
Never change the Sales Order status to Delivered. Convert the Sales Order to an Invoice. Converting a Sales Order to an Invoice will change the Sales Order Status as Delivered automatically which will decrease the Product Demand Qty and also decrease the Product Qty in Stock at same time.
Never change the status of an invoice. There is no need to change the Status of an Invoice unless a mistake was made.
When you create a Purchase Order, set Status to Created or Approved.
When you receive product, change the Purchase Order Status to Delivered.

To better understand the effect on the Product Qty in Zoho, see the following:

Sales Order

Creating a Sales Order increases Product Qty in Demand
Changing Sales Order Status has the following affect on Product Qty

Created - Increases Product Qty in Demand ONLY if previous Status is Delivered or Cancelled
Approved - Increases Product Qty in Demand ONLY if previous Status is Delivered or Cancelled
Delivered - Decreases Product Qty in Demand ONLY if previous Status is Created or Approved
Cancelled - Decreases Product Qty in Demand ONLY if previous Status is Created or Approved

Invoice

Creating an invoice from a Sales Order decreases the Qty in Stock, changes the Sales Order Status to Delivered which decreases the Product Qty in Demand
Changing Invoice Status has the following affect on Product Qty

Created - Decreases Product Qty in Stock ONLY if previous Status is Cancelled
Approved - Decreases Product Qty in Stock ONLY if previous Status is Cancelled
Delivered - Decreases Product Qty in Stock ONLY if previous Status is Cancelled
Cancelled - Increases Product Qty in Stock

Purchase Order

Creating a Purchase order increases the Product Qty Ordered
Changing Purchase Order Status has the following affect on Product Qty

Created - Increases Product Qty Ordered ONLY if previous Status was Cancelled or Delivered. Decreases Product Qty in Stock ONLY if previous status was Delivered
Approved - Increases Product Qty Ordered ONLY if previous Status was Cancelled or Delivered. Decreases Product Qty in Stock ONLY if previous status was Delivered
Delivered - Decreases Product Qty Ordered ONLY if previous Status was Created or Approved. Increases Product Qty in Stock.
Cancelled - Decreases Product Qty Ordered ONLY if previous Status was Created or Approved. Decreases Product Qty in Stock ONLY if previous Status was Delivered.

I hope this helps others to understand how Zoho handles inventory.