Comparing Perpetual On Hand to the General Ledger Inventory Accounts
The procedure for comparing the perpetual on hand at standard cost to the general ledger inventory accounts should be as follows:
- Process ALL Post Inventory Transaction Types
- Ensure that no inventory movements are being done such as receiving, disposition and manual transactions.
- All shipments pending invoicing should be invoiced as the FG credit does not take place at time of pack slip creation but at AR Invoicing.
- Print a report such as the Inventory Listing by Class with Costs report and compare to the GL Inventory accounts.
NOTE: Remember that if you never do a physical inventory and make a starting period adjustment then you will never have good numbers to start with.
Often times when the perpetual on hand inventory at standard cost differs from that of the balance in the general ledger for the corresponding account some of the following scenarios are the cause:
- Transaction Date - Floor dispositioning and any other transactions that are back-dated to a previous days shift puts that previous date into the transaction date in the translog. The stock inventory-as-of report is based on the transaction date as opposed to the system date (the date the transaction was actually performed.) Other examples would be receiving items and adjusting the transaction date or performing manual adjustments and adjusting the transaction date. When creating a shift report the transaction date used is the date of the production report; not the date that the user actually created the report and/or dispositioned the production report.
- Inactive Items - When marking an item as inactive there is no GL transaction that is performed if the item has a positive on hand value. Ensure that inventory items that have been marked as inactive have no on-hand inventory otherwise the cost of the on hand value needs to be included in perpetual inventory when comparing to the GL.
- Non conforming inventory - Inventory listed at the non conform status should be included in the total perpetual value as the system does not reduce the gl inventory account when toggled to that status.
- Miscellaneous Item's GL Account on the AP Invoice - Confirm the general ledger accounts being used for miscellaneous items. Typically the account is an expense account. However, if the user coded the line to an inventory account then the general ledger balance for that account would be out of balance compared to the perpetual inventory for true inventory items with standard costs.
- Items classified incorrectly - The WP class for example may not have had the inventory account overridden in inventory under options-inventory accounts. The system would then pick up the default inventory account which is generally the finished good inventory gl account. There is a report called Inventory Value as of By GL Account that would list the items by the inventory account their transactions are posting to.
- Scanning - If you have Auto-backflush on RT scan to inventory checked, with each scan the perpetual inventory will be adjusted. It will not be correct to the GL until the prod report is processed and PIT is ran. Viewing perpetual to GL before this will show out-of-balance
- Performing transactions in the incorrect Eplant - Ensure that users are logged into the correct eplant when processing transactions. If the translog transaction is not associated to the correct eplant the items will not show up in PIT.
- Transaction codes - GL account numbers can be assigned to a transaction code. If the user selects a transaction code that has an account associated to it and also chooses to backflush materials, then the trans code GL account will override the cost elements receive/dispo account which should be an inventory account for the inventory items involved in the materials backflush. This may cause an out of balance situation.
- Post Inventory Transaction screen - If the PIT Screen is open and transactions are posted to the same trans type and date range then the user processes the current transactions through PIT without resetting the filter then the inventory transactions will show as processed in the translog even though the corresponding entries were not actually processed.
- Production Reporting- Phantom Item's - When doing production reporting on an item that uses a phantom item. If the user adjusts the amount to disposition and selects to not pull any of the phantom material or the phantom components out of inventory then the system will credit the phantoms raw material account despite that there was no material pulled out.
- Asset Management Modules-Preventative Maintenance and Project Manager - Currently the system does not post to the general ledger for any consumed materials from either the preventative maintenance or project manager modules. The user should verify if items on the inventory reports are consumed through these modules and if they are and they do have standard costs then the gl should be adjusted using a general journal entry or the user can choose to exclude the totals from the total on the report.
- Packing Slip/Std Cost change timing - If a packing slip is cut today and a change is made to the standard cost before the invoice is created, the invoice will use the new cost rather than the cost that was in effect when the packing slip was cut it would cause the inventory to be out of balance. Solutions are to make sure invoices are posted before cost changes or use the Inventory Setup ( System Parameters) - 'Post shipments awaiting invoicing / PIT' feature.
If all procedures are set in place then consider making inventory account adjustments based on the current on hand at standard costs for each class. Following the adjustment review your PIT transactions on a daily basis. We suggest you do not post the PIT transactions, but rather do the calculations off line to figure out what will post to the GL if the transactions are processed. IQMS Technical Support can better assist researching the cause of the out of balance situation when transactions are at the prepost status rather than posted.
Reconciling after transactions have been posted by using the Inventory Level As of Reports can also be a challenge. The figures may be close but because of timing issues they may not be exact. If using the Inventory level as of reports consider that they are transaction date based which can be modified by the user. Other reports are available upon request where the date is system date.