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How to Reconcile Your How to Reconcile Your Manufacturing Month-End CloseManufacturing Month-End Close

Douglas A. Volz Douglas A. Volz

Sharon L. Widmer Sharon L. Widmer October 1998October 1998

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Update for May 2007Update for May 2007 While at KPMG, Doug first wrote this in 1998. This version is While at KPMG, Doug first wrote this in 1998. This version is

from a co-presentation with Sharon Widmer, a valued friend and from a co-presentation with Sharon Widmer, a valued friend and co-worker from KPMG/Bearingpoint.co-worker from KPMG/Bearingpoint.

Starting in Release 11.5.10 (or 11.5.9 plus patches), the period Starting in Release 11.5.10 (or 11.5.9 plus patches), the period close processes will “snapshot” your month-end inventory close processes will “snapshot” your month-end inventory balances.balances.

However, even with this new functionality the snapshot does not However, even with this new functionality the snapshot does not consider receiving inventory, nor does it provide useful month-consider receiving inventory, nor does it provide useful month-end inventory valuation reporting. The only new report is a end inventory valuation reporting. The only new report is a period close reconciliation report, automatically generated when period close reconciliation report, automatically generated when you close your inventory accounting period.you close your inventory accounting period.

Doug has helped over 40 clients with reconciliation challenges, Doug has helped over 40 clients with reconciliation challenges, from detailed diagnoses, training sessions, custom from detailed diagnoses, training sessions, custom reconciliation reports and assistance with streamlining month-reconciliation reports and assistance with streamlining month-end close processes. His reconciliation experience started with end close processes. His reconciliation experience started with early Oracle clients in Release 9 and continues up to present early Oracle clients in Release 9 and continues up to present versions.versions.

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Reconciliation AgendaReconciliation Agenda

General Reconciliation PrinciplesGeneral Reconciliation Principles Receiving Valuation AccountsReceiving Valuation Accounts Inventory Valuation AccountsInventory Valuation Accounts Work In Process Valuation AccountsWork In Process Valuation Accounts

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There Has to be an Easier Way !!There Has to be an Easier Way !!

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General Reconciliation General Reconciliation PrinciplesPrinciples

Use the following formula:Use the following formula:Prior cum. balance + monthly accounting Prior cum. balance + monthly accounting activity = month-end cumulative G/L activity = month-end cumulative G/L balancebalance

Also compare above formula to cumulative Also compare above formula to cumulative report balancesreport balances

If you do not balance, check for manual G/L If you do not balance, check for manual G/L journal entries and entries from other journal entries and entries from other subledgerssubledgers

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More Reconciliation Principles: More Reconciliation Principles: INV, Receiving, and WIPINV, Receiving, and WIP

Ignore minor rounding differences: Ignore minor rounding differences:

• When the unit cost precision is higher When the unit cost precision is higher than the currency decimal precision, you than the currency decimal precision, you may have minor rounding differences may have minor rounding differences between the valuation reports and between the valuation reports and cumulative accounting totalscumulative accounting totals

Watch out for transaction and reporting Watch out for transaction and reporting cut-offs!!cut-offs!!

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How to Balance the Receiving How to Balance the Receiving Valuation AccountsValuation Accounts

Use the Receiving Valuation Reports to Use the Receiving Valuation Reports to get the month-end balancesget the month-end balances

Use the Receiving Account Distribution Use the Receiving Account Distribution Report for monthly increases to the Report for monthly increases to the Receiving Valuation AccountReceiving Valuation Account

Use the Material Distribution Summary Use the Material Distribution Summary Report for monthly decreases to the Report for monthly decreases to the Receiving Valuation AccountReceiving Valuation Account

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How to Balance the Inventory How to Balance the Inventory (Stores)Valuation Accounts(Stores)Valuation Accounts

Use the Inventory Valuation Reports to Use the Inventory Valuation Reports to get the month-end balancesget the month-end balances

You can also use the Transaction You can also use the Transaction Historical Summary Report Historical Summary Report

Also use the Period Close Value Also use the Period Close Value Summary Report, for a double checkSummary Report, for a double check

Use the Material Distribution Summary Use the Material Distribution Summary Report for monthly totalsReport for monthly totals

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What to Check If the Inventory What to Check If the Inventory Accounts Do Not BalanceAccounts Do Not Balance

Check for miscellaneous inventory Check for miscellaneous inventory transactions, where the offset account is transactions, where the offset account is the same as the subinventory valuation the same as the subinventory valuation accountaccount

Use the Transaction Distribution Inquiry Use the Transaction Distribution Inquiry to find these, query for entries that hit to find these, query for entries that hit your subinventory valuation accounts, but your subinventory valuation accounts, but the Accounting Line Type is “Account”the Accounting Line Type is “Account”

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How to Balance the Intransit How to Balance the Intransit Valuation AccountsValuation Accounts

Use the Intransit Valuation Reports to Use the Intransit Valuation Reports to get the month-end balancesget the month-end balances

• Choose Yes for the option “Only Choose Yes for the option “Only Display Inventory You Own”Display Inventory You Own”

Use the Material Distribution Summary Use the Material Distribution Summary Report for monthly totalsReport for monthly totals

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How to Balance the WIP How to Balance the WIP Valuation AccountsValuation Accounts

Use the WIP Valuation Report to get the Use the WIP Valuation Report to get the month-end balances (No cut-off month-end balances (No cut-off issues!!)issues!!)

• Choose the option to include closed Choose the option to include closed jobsjobs

Use the WIP Account Summary and Use the WIP Account Summary and Material Distribution Summary Reports Material Distribution Summary Reports for monthly totalsfor monthly totals

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Report Drill-Down to the Report Drill-Down to the General LedgerGeneral Ledger

The Inventory/WIP GL batch numbers are The Inventory/WIP GL batch numbers are visible in the G/L, as part of the journal entry visible in the G/L, as part of the journal entry batch namebatch name

You can run the Material and WIP You can run the Material and WIP Distribution Reports by this G/L batch Distribution Reports by this G/L batch number and compare to the General Ledgernumber and compare to the General Ledger

In R10.7 GUI you can drill down by GL Batch In R10.7 GUI you can drill down by GL Batch in the Inv. GL Transfers Screenin the Inv. GL Transfers Screen

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List of Month-End Close ReportsList of Month-End Close Reports

Material Distribution Detail/Summary ReportsMaterial Distribution Detail/Summary Reports WIP Account Detail/Summary ReportsWIP Account Detail/Summary Reports Receiving Account Distribution ReportReceiving Account Distribution Report Purchase Price Variance ReportPurchase Price Variance Report Invoice Price Variance ReportInvoice Price Variance Report Discrete Job ValueDiscrete Job Value Repetitive Value ReportRepetitive Value Report Expense Job Value ReportExpense Job Value Report Margin Analysis ReportMargin Analysis Report

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Month-End Close Reports Month-End Close Reports (Cont’d)(Cont’d)

Inventory Value ReportInventory Value Report Intransit Value ReportIntransit Value Report Subinventory Account Value ReportSubinventory Account Value Report All Inventories Value ReportAll Inventories Value Report Receiving Value ReportReceiving Value Report Receiving Value by Destination ReportReceiving Value by Destination Report WIP Value ReportWIP Value Report Period Close Value Summary ReportPeriod Close Value Summary Report

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Common ProblemsCommon Problems

Uncosted material transactions in Uncosted material transactions in MTL_MATERIAL_TRANSACTIONSMTL_MATERIAL_TRANSACTIONS

WIP labor/overhead transactions stuck in WIP labor/overhead transactions stuck in WIP_TRANSACTIONSWIP_TRANSACTIONS

Stuck PO receipts in Stuck PO receipts in RCV_TRANSACTIONS_INTERFACERCV_TRANSACTIONS_INTERFACE

Report cut-off issues at month-endReport cut-off issues at month-end Running multiple periods at a time, and back-Running multiple periods at a time, and back-

dating transactionsdating transactions

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Common Problems (Cont’d)Common Problems (Cont’d)

For GUI, Wrong System Account for For GUI, Wrong System Account for “Receiving Accrual Account” field “Receiving Accrual Account” field

Not correctly initializing the subinventory Not correctly initializing the subinventory summary balances for first period close summary balances for first period close

Not reclassifying the initial legacy GL Not reclassifying the initial legacy GL balances to match Oracle systembalances to match Oracle system

Release 10.7 Period Close Bug - Release 10.7 Period Close Bug - #667196 (usually for Average Costing)#667196 (usually for Average Costing)

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Desired EnhancementsDesired Enhancements

Add a close date parameter to the Add a close date parameter to the Discrete Job Value Report, to facilitate Discrete Job Value Report, to facilitate running the report for all closed jobs at running the report for all closed jobs at month-endmonth-end

Create a system balancing/comparison Create a system balancing/comparison report to do this work for youreport to do this work for you

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Desired Enhancements (Cont’d)Desired Enhancements (Cont’d)

Add Oracle G/L inquiry drill-down capability Add Oracle G/L inquiry drill-down capability for Inventory and WIP for Inventory and WIP

Add a standard report or alert to find the Add a standard report or alert to find the miscellaneous inventory transactions that miscellaneous inventory transactions that are causing an out-of-balanceare causing an out-of-balance

Simplify, make more robust, or eliminate the Simplify, make more robust, or eliminate the interfaces needed in Oracleinterfaces needed in Oracle

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Send Email Address to Get the Send Email Address to Get the Following Scripts/PapersFollowing Scripts/Papers

Interface script - review interface tablesInterface script - review interface tables Uncosted transactions instructionsUncosted transactions instructions SQL script to list entries in the SQL script to list entries in the

RCV_TRANSACTIONS_INTERFACE RCV_TRANSACTIONS_INTERFACE tabletable

Latest paper on the AP Accruals Latest paper on the AP Accruals (updated from 1996/97 OAUG conf.)(updated from 1996/97 OAUG conf.)

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Thank You for Your Attendance Thank You for Your Attendance and Participationand Participation

Douglas A. VolzDouglas A. Volz

Sharon L. Widmer Sharon L. Widmer