I am a checklist person. Managing my day – checklist. Ensuring we have everything for our courses – checklist. Month-end procedures in Visual ERP. Another checklist. So, it may not come as a surprise that I have a checklist for reconciling inventory in Visual ERP.
Section 1 – General Ledger
First section is all related to ensuring the General Ledger is accurate.
- Are all transactions posted?
- Are there any invalid batch types? You know the ones. Someone posts a General Journal Entry or Accounts Payable Invoice to an Inventory Account.
- Did someone use an Inventory account on a Purchase Order? If you are buying inventory it always needs a part ID. Once you have a Part ID, then you don’t need a General Ledger Account. This should NEVER happen.
Once, I am satisfied that the General Ledger is ship-shape, my next step is working on Cost layers.
Section 2 – Cost Layers
This is a very full area but I have a system.
1. Inventory Valuation – negative balance cost layers. When running this report, this option will show if there are any potential problems with on-hand quantities and FIFO layers. I find them and fix them, then I would go onto to Cost Layer Distribution exceptions. This is one of the powerful reports in Visual ERP that shows how the FIFO layers are linked to one another. When running this report for exceptions, it will identify instances layers are not connected to another layers. There is no FIFO. The situation is there is no IN layer to connect to an OUT layer. If this was the case, I would check on-hand quantities. Once fixed I would go back and run the report AGAIN.
I don’t like doing the same thing twice, so here’s my new number 2. I look for any OUT inventory transactions that are not fully linked to an IN layer. It is a simple query but it really helps to focus on specific problems. Before I run the query, I run the 1st 2 steps of costing utilities so Visual ERP can create lots of FIFO layers. Then I am left with a limited number of exceptions.
- The most common problem would be negative inventory or if you run FIFO by part location, negative location quantities.
- There is another scenario. A Work Order material issue drove inventory negative.
Then the manufacturing department realized the problem and fixed it with an
issue return. On hand quantities looks better but what remains, even after
running the 1st 2 steps of costing?
- There is an in layer (issue return) offset by a out layer (issue). Visual will not allow them to connect since they are related …. to the same order.
- This can happen with customer orders as well.
There is a step by step fix for this but needless to say, they need to be eliminated. I could put all the details in here but it might be a little boring. And I don’t want you to think that accountants are boring.
Once these are eliminated, you can now go to the Cost Layer Distribution exceptions report to see if there are any problem with the costs per unit not matching. The report is going to be much shorter and much easier to deal with the exceptions.
I am so happy that I have changed my mind on this approach. I can hardly wait for my next inventory reconciliation.