w405 - balancing inventory value to the gl · inventory and your inventory general ledger account....

Summit 2007: Get Connected

W405 – Balancing Inventory Value to the GL

Marli McElroyApplication Consulting

Focus in this session will be on balancing your physical inventory value to the ledger inventory. Learn where the system acquires the data for both the balance report and the ledger autobatches. See what reports can be used to verify the data accuracy and discover steps to troubleshoot imbalances between your physical inventory and your inventory general ledger account.

Pre-requisites: Basic knowledge of Inventory Movement

Wednesday, 1:15 pm

© 2007 Activant Solutions Inc. All Rights Reserved

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Session Objectives

How to start with accurate inventory valueHow to verify accuracy of the inventory balance report How to reconcile General Ledger (GL) postings to the inventory balance reportHow to identify common processing problems



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Return on Investment Opportunity

Balanced GL to inventory value Tighter processesIdentify problems and trends

AdjustmentsTheftProcess problem

Cost editsIncorrect vendor invoicesNon-stock trends


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Verify a Good Starting Point

Does the beginning inventory value match the balance in the inventory account at the end of previous month?If a good starting point cannot be established, ensure the inventory value reports are correct and match the general ledger to this total



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The Inventory Value Report

The Inventory Value Report = Quantity on Hand x Inventory Cost

Conduct a physical inventory to establish correct inventory countsInventory cost should also be examined to make sure this is accurate

Run the Inventory Value Report (not the Inventory Value Summary Report) or FIFO Edit Cost Layer ReportEdit incorrect values


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The Non-Stock Inventory Value Report

Non-Stock Inventory Value Report is part of the GL inventory valueComes from non-stock material allocated to transactionsReview report to make sure the transactions are valid



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The Inventory Balance Report

Once the system inventory value is accurate, we can use the Inventory Balance Report to check each month

Inventory Balance Report is the summary of the inventory value reports and all reports that document inventory changeIt should be the first line of defense when balancing inventory

Inventory Balance Report


8How to Verify Accuracy of the Inventory Balance Report

Are the period starting, period ending, and updated dates valid?

The period starting and period ending dates should span the periodThe period ending date and updated date must be identicalIf they are not identical, report may not be accurate

Transactions may have occurred that would cause imbalances



9How to Reconcile GL Postings to the Inventory Balance Report

Print the Transaction History ReportLedger/Reporting/History of posting transactionsLimit report to the inventory accounts



Cost of stock and non-stock (NS) goods sold should match the CSLD autobatch postingInvoiced cost edit variances will agree with the invoiced cost edit variance (CVAR) autobatch postingThe net value of stock and non-stock transfers received and transferred out corresponds with the received value of transfers (RTRN) autobatch




The value of stock and non-stock purchase order material received will not equal any autobatch postingThe value of stock and non-stock vendor returns values will not match any autobatch posting



Value of stock adjustments less codes 6 and 99 will match the ADJ autobatch posting

Codes 6 and 99 will not be posted




Value of non-stock adjustments less code 99s will match non-stock adjustments (NSAJ) autobatch postingAssembly for stock adjustments will match assembly for stock (ASIA) autobatch



Value of stock cost changes plus code 94s and 98s (from the Cost Change Register) corresponds to the item cost change (CCHG) autobatch posting

Code 94s and 98s are not included on the Inventory Balance Report

Value of non-stock cost changes will equal the non-stock item cost change (NSIC) autobatch posting

The company option “non-stock cost update” must be enabled




Reconciling material receiptsStock/NS material received and returned are not posted directly to inventory GL via one autobatchPurchase order receipts and vendor returns are posted through Payables

Expense Journal (EXP)Purchase Order Cost Discrepancy Journal (POCD)Unreconciled Material Accrual Journal (UMAC)Reversal of previous months unreconciled material accrual posting (REV)


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How to Identify Common Problems

Inventory postingsPayables processingMaterial receipts reconciliationMiscellaneous inventory valueOther considerations



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Inventory Postings

All postings to GL inventory should come from autobatches

Autobatches come from source reports in the system that record inventory transactions

Review the Transaction History Report for inventory GL accounts

Postings with source AJE, SRE, and REV should usually not post to inventory accounts


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Inventory Postings

Do you separate stock and non-stock inventory?Can help to classify and identify problemsNot all autobatches separate stock and non-stock inventory

POCD autobatch UMAC autobatch

This can make it difficult to reconcile



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Inventory Postings

On Acclaim 17, the Payables Discrepancy Journal will now separate stock and non-stock, although the POCD autobatch will still only have one inventory accountThe Unreconciled Receivings List will separate stock and non-stock values and the UMAC autobatch can post to separate inventory accounts


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Payables Processing

Every payable should have a PO# or a RET#Incorrect postings to Expense Journal

Print the Expense Journal for inventory accountsSequence by ACT# and limit to the inventory accounts



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Payables Processing

If users confirm their direct ship (DS) purchase orders in payables and then invoice the customer for this DS material before they receive the vendor's invoice for that DS PO, the inventory general ledger account will have been relieved without ever having been increased Can be identified by running the DS Confirmation register with the option “Only unexpensed DS Confs?” set to YES


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Payables Processing

Example:Customer order and PO created on 3/20/07Customer needs to be invoiced so DS PO confirmed on 3/31/07 for $250

March CSLD autobatch credits inventory and debits COGS

Vendor’s invoice entered on 4/4/07 for $250April EXP autobatch debits inventory and credits A/P



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Open Reconciliations

Print the Payables Discrepancy Journal for open reconciliations

Open reconciliations are invoices that were accepted with the “Reconciled?” field set to NO

There should be no invoices on this reportAddress these through Material Receipts Reconciliation or Edit/Delete Payable menu optionsAfter completing open reconciliations, print and commit the Discrepancy Journal


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Unreconciled Receipts

Run the unreconciled receivings list during the month but do not commitAre all unreconciled receipts valid?

Are you still awaiting the invoices for these items?

Are vendor returns valid?Were requisitions included in your posting?



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Use the balancing unreconciled material receipts formula to confirm valid entries:

Beginning unreconciled receipts value+ Material receipts- AP expenses posted to Inventory- Value of confirmed vendor returns+ Code 99 stock and non-stock adjustments+ AP discrepancies= Ending unreconciled receipts value


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Invalid unreconciled receiptsRemove them!

New payable– Solution #2604

Remove completed purchase orders and vendor returns as of a selected date

– Expedite purchase/remove– Expedite return/remove– Quickly remove all receivings for old POs and vendor

returns



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Miscellaneous Change in Inventory Value

If figure is very large, double check the datesQREBITEM

Rebuilds inventory stock status (including allocated quantity) from open orders, purchase orders, vendor returns, and transfersInventory value includes free and allocated stockCorrection shows in change in miscellaneous inventory value

Full files


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Company Options

The following Inventory Company options should be set accordingly:

COST DS ITEMS VIA PO: YNS CUSTOMER COST UPDATE IN EXP-PURCHASE: BOTHNS CUSTOMER COST UPDATE IN PURCHASE: Y



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Company Options

Example:Customer order for NS item created at $45 costCost is edited on PO to $55

If NS CUSTOMER COST UPDATE IN PURCHASE is Y:

When material is received, cost would update on the order to $55

If NS CUSTOMER COST UPDATE IN PURCHASE is N:

When material is received, cost would NOT update on the order


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What Version of the Software are You On?

As of A12: Compatible with FIFO

As of A13: Compatible with secondary processing

As of A14:Modifications to assembly-for-stock orders



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Posting the Difference in Inventory

Post remaining changeCompare ending inventory value to balance of inventory accountManually post the difference

Erroneous unreconciled receivingsChange in miscellaneous inventory value


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If Problems Continue . . .

Carefully review all procedures at month endReview register detail

Look for figures that seem unusually high or lowLook for excessive activity

Perform inventory movement procedures dailyEasier to analyze registersJCM can be created to facilitate process



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If Problems Continue . . .

MaterialityValue variances as a percentage of inventory valueExcessive time spent

Cost of reducing small variances might not be justified by value received


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Additional Resources

Summit 2007 presentationsT609, T812, T211

Inventory Movement documentationManualSolutions #2853, #2859 and #5612

Web-Based TrainingClassroom-Based Training



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Suggested Action Plan

Perform month-end closing proceduresPrint/clear/commit reports, registers, and journalsUpdate Inventory Balance ReportPost autobatches

Compare Inventory Balance Report to the transaction history for the GL inventory accountReview Payables reports for accuracy Post inventory discrepancy


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Summary

Beginning balanceInventory Balance ReportInventory autobatchesIdentifying problems



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Thank You for Attending

W405 – Balancing Inventory Value to the GLMarli McElroyPlease submit the Session Feedback Form

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w405 - balancing inventory value to the gl · inventory and your inventory general ledger account....

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