User Tools

Site Tools


faq:inventory_reconciliation

Differences

This shows you the differences between two versions of the page.

Link to this comparison view

Both sides previous revisionPrevious revision
Next revision
Previous revision
faq:inventory_reconciliation [2013/02/21 13:17 (11 years ago)] clifffaq:inventory_reconciliation [2021/09/03 16:50 (3 years ago)] (current) – [Inventory Reconciliation] jbalasabas
Line 1: Line 1:
 ====== Inventory Reconciliation ====== ====== Inventory Reconciliation ======
-[[:employee:inventory_reconciliation|Employee article regarding additional techniques with inventory reconciliation]]+[[:employee:inventory_reconciliation|Employee only article regarding additional techniques with inventory reconciliation]] 
 + 
 +Freshdesk: https://support.windwardsoftware.com/a/solutions/articles/66000495304
  
 ===== Check your processes ===== ===== Check your processes =====
Line 15: Line 17:
 So what happens if you change a PO line, an inventory value line on a bill, or a line on an invoice? The answer is you break things, and can no longer reconcile. If you follow proper processes things should reconcile unless you change things after the fact. The one exception to note is overselling. If you oversell on an invoice you oversell at standard cost. When you receive the product at cost other than standard, there is now an outage in the system. In order to fix this issue you have to go back to all invoices that were oversold and change the cost on them to the amounts from the PO line(s) that would have filled them. So what happens if you change a PO line, an inventory value line on a bill, or a line on an invoice? The answer is you break things, and can no longer reconcile. If you follow proper processes things should reconcile unless you change things after the fact. The one exception to note is overselling. If you oversell on an invoice you oversell at standard cost. When you receive the product at cost other than standard, there is now an outage in the system. In order to fix this issue you have to go back to all invoices that were oversold and change the cost on them to the amounts from the PO line(s) that would have filled them.
  
-So what kind of things can cause problems if you change them after the fact? If you change either side of the PO to Bill, or PO to Invoice process you will be out of reconciliation. So editing cost or quantity of a PO line, editing cost or quantity of an invoice line, or changing the amount on the inventory line of a bill after the fact will cause problems. Manual adjustments effect the sub-ledger totals so we need to place manual adjustments in the list of things that break reconciliation. So why do manual adjustments break the system? Ans: because every manual adjustment has to have a corresponding GL adjustment of equivalent dollar value. Here is a list of some things not to do: +So what kind of things can cause problems if you change them after the fact? If you change either side of the PO to Bill, or PO to Invoice process you will be out of reconciliation. So editing cost or quantity of a PO line, editing cost or quantity of an invoice line, or changing the amount on the inventory line of a bill after the fact will cause problems. Manual adjustments effect the sub-ledger totals so we need to place manual adjustments in the list of things that break reconciliation. So why do manual adjustments break the system? Ans: because every manual adjustment has to have a corresponding GL adjustment of equivalent dollar value. 
-  * Change the cost on an invoice line +
-  * Change the cost or quantity on a PO line +
-  * Change the Inventory Value posting on a bill +
-  * Oversell an item on an invoice +
-  * Make a manual adjustment without a corresponding GL entry to that hits the inventory value for the same amount+
  
 +  * Here are some key points:
 +    * Do not change the cost on an invoice line
 +    * Do not change the cost or quantity on a PO line after PO is completed
 +    * Do not change the Inventory Value posting on a bill
 +    * Do not oversell an item on an invoice
 +    * Do not make a manual adjustment without a corresponding GL entry to that hits the inventory value for the same amount
  
 ===== Process Suggestions ===== ===== Process Suggestions =====
Line 57: Line 60:
   * Why is a 5000 level account used instead of a 6000 level account?   * Why is a 5000 level account used instead of a 6000 level account?
     - This is because when you view GL profitability, only 4000 and 5000 level accounts are used. 6000 level accounts don't come in until you do financial comparisons for the entire set of expenses including rent etc.     - This is because when you view GL profitability, only 4000 and 5000 level accounts are used. 6000 level accounts don't come in until you do financial comparisons for the entire set of expenses including rent etc.
 +
  
 ==== Multi currency discussion on entering bills to match the PO ==== ==== Multi currency discussion on entering bills to match the PO ====
Line 75: Line 79:
  
 GAAP stands for generally accepted accounting principles. One of those principles is that the inventory be recorded to your accounting system on the date it is received. This principle simplifies all the scenarios and details into one idea. If you stray from this, you must make sure you have made all of the appropriate adjustments, as things may not add up in System Five after you sell the product. GAAP stands for generally accepted accounting principles. One of those principles is that the inventory be recorded to your accounting system on the date it is received. This principle simplifies all the scenarios and details into one idea. If you stray from this, you must make sure you have made all of the appropriate adjustments, as things may not add up in System Five after you sell the product.
 +<code> 
 +Excerpt from Federal Accounting Standards Advisory Board 
 +-------------------------------------------------------- 
 +38. Recognition. The consumption method of accounting for the recognition of expenses shall  
 +be applied for operating materials and supplies. Operating materials and supplies shall be  
 +recognized and reported as assets when produced or purchased. “Purchased” is defined as  
 +when title passes to the purchasing entity. If the contract between the buyer and the seller is  
 +silent regarding passage of title, title is assumed to pass upon delivery of the goods. Delivery  
 +or constructive delivery shall be based on the terms of the contract regarding shipping and/or  
 +delivery 
 +</code>
 In multi currency systems you will start by entering a PO for your supplier just like in a non-inventory system. The only real difference is that there are different currencies you can view the PO in. It will default to viewing the PO in the currency of the supplier you chose. When you receive the purchase order it is like taking a snapshot in time as all the items received are then permanently set to be the currency of your inventory value account (your local currency). The PO has created the sub-ledger entries and valued them in your local currency at the date of receiving. They will now stay stable at that value in your local currency. This prevents your inventory from changing value in your local currency every time the exchange rate changes. This is important on the ledger side of things because that snapshot in time captures the value that will be used as the value when you sell the product on an invoice to a customer. Why is the date so important? In multi currency systems you will start by entering a PO for your supplier just like in a non-inventory system. The only real difference is that there are different currencies you can view the PO in. It will default to viewing the PO in the currency of the supplier you chose. When you receive the purchase order it is like taking a snapshot in time as all the items received are then permanently set to be the currency of your inventory value account (your local currency). The PO has created the sub-ledger entries and valued them in your local currency at the date of receiving. They will now stay stable at that value in your local currency. This prevents your inventory from changing value in your local currency every time the exchange rate changes. This is important on the ledger side of things because that snapshot in time captures the value that will be used as the value when you sell the product on an invoice to a customer. Why is the date so important?
  
 Assume each date has a different exchange rate. Then if you have a different date on the PO receiving and Bill associated to that receiving you run into a problem. The invoice to the customer will have a different value than the bill that put it onto the ledger. What went into inventory end up not matching what comes out of inventory. It should make sense that if we put $100 (local currency) of product into inventory that we must take out $100 (local currency) when selling the inventory. So don't calculate the local currency two different ways by choosing two different rates: keep the same rate by using the same date. Assume each date has a different exchange rate. Then if you have a different date on the PO receiving and Bill associated to that receiving you run into a problem. The invoice to the customer will have a different value than the bill that put it onto the ledger. What went into inventory end up not matching what comes out of inventory. It should make sense that if we put $100 (local currency) of product into inventory that we must take out $100 (local currency) when selling the inventory. So don't calculate the local currency two different ways by choosing two different rates: keep the same rate by using the same date.
- 
  
 ==== Changing cost on an invoice line ==== ==== Changing cost on an invoice line ====
Line 169: Line 182:
  
 ===== My Purchase & Sales History doesn't Match My On Hand Stock ===== ===== My Purchase & Sales History doesn't Match My On Hand Stock =====
 +
  
  
Line 178: Line 192:
 Sometimes it is not so easy to tell what caused the problem. In order to seek out where the trouble is there are some reports and routines we can use. It is often necessary to qualify whether we should be using this report, so I will try to add some information that might indicate you should use this report of routine. Sometimes it is not so easy to tell what caused the problem. In order to seek out where the trouble is there are some reports and routines we can use. It is often necessary to qualify whether we should be using this report, so I will try to add some information that might indicate you should use this report of routine.
  
 +==== Back dated inventory value report ====
 +This report takes into account some, but not all variables that allow us to back date inventory value. So this report can not be used for accounting purposes. In order to get accurate information on what the inventory value was at a specific point in time, you must actually save a backup from that date and time. Since this is normally needed for review at month end, I would suggest that you archive your month end backups. This does not work for everyone, because they are not up to date with data entry. If that is the case any transactions that were not in the backup that need to be in the backup would have to be entered into the backed up data set (double entered)
  
 +==== Stock/Ledger Reconciliation report ====
 +This report is designed to compare a back dated inventory value to the ledger, and give you how far they are out on a month by month basis. It uses the same code as the back dated inventory value report and thus can not be used for accounting purposes either. 
  
  
faq/inventory_reconciliation.1361481431.txt.gz · Last modified: 2013/02/21 13:17 (11 years ago) by cliff