60 Inventory Orgs? 6 Ledgers? No Worries, Reconcile Your Inventory With
Ease!
OAUG NorCal Training DayJanuary 13, 2011
Douglas VolzDouglas Volz Consulting
Reconciliation Agenda
Background
General Reconciliation Principles
Receiving Valuation Accounts
Inventory Valuation Accounts
Work In Process Valuation Accounts
Common Reconciliation Challenges
Custom Solutions for Multiple Organizations
Slide 2
Summary Background
Inventory to G/L reconciliation can be difficult
This presentation includes the standard Oracle techniques
Plus additional ideas and solutions that exceed standard tools
Doug has helped Oracle clients with Cost Accounting since 1990
Doug also leads the OAUG Cost Management SIG
Slide 3
Sample Financial Structure to ReconcileCorporate
ConsolidatedLedger
Secondary Ledger
Primary Ledger
Legal Entity
Operating Unit
Inventory Orgs
Corporate Consolidated Ledger(USD)
USA PL(USD)
Other LEs
US OU
CORP LE
Item Master(ZZZ)
Switzerland Org
Korea OU
Switzerland(CHE) LSP’sLSP’s
European SLs
ORG Korea
SwitzerlandOU
US Dist. Centers
US LSP Orgs
Swiss Dist. Center
Asia-Pac OUs
Asia-Pac Dist. Centers
Europe Dist. Centers
Europe LSP Orgs
Other European
OUs
Korea LE Asia-Pac LEs
Swiss LEOther
European LEs
Korea(KRW)
Asia-Pac LEs
Swiss PL (USD)
European PL(USD)
Slide 4
There Has to be an Easier Way !!
Slide 5
General Reconciliation Principles
Use the following formula:Prior cum. balance + monthly accounting activity = month-end cumulative G/L balance
Also compare above formula to cumulative perpetual report balances
If you do not balance, check for manual G/L journal entries and entries from other subledgers
Slide 6
Sample Reconciliation Worksheet
Slide 7
More Reconciliation Principles
Ignore minor rounding differences: When the unit cost precision is higher than the
currency decimal precision, you may have minor rounding differences between the valuation reports and cumulative accounting totals
Release 11i: Watch out for transaction & reporting cut-offs issues
Release 12: All Inventory and Receiving Value Reports have an “As of Date”
Slide 8
How to Balance the Receiving Valuation Accounts
Use the Receiving Valuation Reports to get the month-end balances
Use the Receiving Account Distribution Report for monthly increases to the Receiving Valuation Account
Use the Material Distribution Summary Report for monthly decreases to the Receiving Valuation Account
Slide 9
Receiving Value Report
Slide 10
Receiving Account Distribution Report
Slide 11
How to Balance the Inventory Valuation Accounts
Use the Inventory Valuation Reports to get the month-end balances
Or, use the Period Close Reconciliation Report
You can also use the Transaction Historical Summary Report Transaction Historical Summary Report – Standard Costing Transaction Historical Summary Report – Average Costing
Also use the Period Close Value Summary Report
And for monthly totals use the Material Distribution Summary Report
Slide 12
Material Account Distribution Summary
Slide 13
All Inventories Value Report
Slide 14
InventoryValue Report
Slide 15
If the Inventory Accounts Do Not Balance
Check for miscellaneous inventory transactions, where the offset account is the same as the subinventory or organization valuation account
Use the Material Distribution Inquiry to find these, query for entries that hit your subinventory valuation accounts (Std) or organization valuation accounts (Avg), where the Accounting Line Type is “Account”
Account Alias Issue Example
10 Account
CR Inventory Account
Inventory Acct Line Type
10 Inv valuation
DR Inventory Account (from the Account Alias)
Slide 16
If the Inventory Accounts Do Not Balance
Slide 17
How to Balance the Intransit Valuation Accounts
Use the Intransit Valuation Reports to get the month-end balances Choose Yes for the option “Only Display Inventory You
Own”
Use the Material Distribution Summary Report for monthly totals
Slide 18
Intransit Value Report
Slide 19
How to Balance the WIP Valuation Accounts
Use the WIP Valuation Report to get the month-end balances (No cut-off issues) Choose the option to include closed jobs
Use the WIP Account Summary and Material Distribution Summary Reports for monthly totals
Slide 20
WIP Value Report
Slide 21
WIP Account Summary Report
Slide 22
R12: Journal Entries Report – Cost Management
Slide 23
Process Category: Inventory Receiving
Work in Process Manual / Third Party
Merge
Journal Entries Report – Cost Management
Slide 24
Journal Entries Report – Cost Management
Slide 25
Journal Entries Report – Cost Management
Slide 26
Drill-Down From the General Ledger
Release 11i: The Inventory/WIP GL batch numbers are visible in the G/L, as part of the journal entry batch name
Release 11i: You can run the Material and WIP Distribution Reports by this G/L batch number and compare to the General Ledger
Release 12: You cannot see the organization code or G/L batch number on the G/L journal entry batch name unless you customize your SLA rules
Release 12: You can drill down from your G/L to the Subledger Accounting Entries to the material, receiving and WIP transactions
Release 12: You can run the Subledger Journal Entries, Account Balances or Account Analysis Reports (with setup required)
Slide 27
Oracle Release 10 to 11i Inventory/WIP Integration to the GL
COLUMN NAME DATA TO INSERT DESTINATION WHERE THE DATA SHOWS UP----------- ------------------------------ ---------------------------- ------------------------------REFERENCE1 GL_BATCH_ID, ORGANIZATION_CODE JE_BATCH NAME Post Journals Form
REFERENCE2 Insert GL_BATCH_DATE, ORGANIZATION_CODE, ORG_GL_BATCHES.DESCRIPTION, JE_BATCH DESCRIPTION Post Journals Form
REFERENCE3 DO NOT POPULATE Use unknown
REFERENCE4 DO NOT POPULATE JE_HEADER NAME Account Analysis Report, Account Inquiry
Note: Journal Import will append JE_CATEGORY_NAME, CURRENCY_CODE
REFERENCE5 Same as REFERENCE2 JE_HEADER DESCRIPTION Account Inquiry
REFERENCE6 DO NOT POPULATE JE_HEADER external_reference
REFERENCE7 DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_FLAG
REFERENCE8 DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_PERIOD_NAME
REFERENCE9 DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_CHANGE_SIGN_FLAG
REFERENCE10 Same as REFERENCE2 JE_LINES DESCRIPTION General Ledger Report, Journal Entry Inquiry
REFERENCE21 Insert GL_Batch_ID GL_JE_LINES.REFERENCE1 Not Displayed
REFERENCE22 Insert ORGANIZATION_CODE GL_JE_LINES.REFERENCE2 Not Displayed
REFERENCE23 Insert TRANSACTION_ID GL_JE_LINES.REFERENCE3 Not Displayed
COLUMN NAME DATA TO INSERT DESTINATION WHERE THE DATA SHOWS UP----------- ------------------------------ ---------------------------- ------------------------------REFERENCE1 GL_BATCH_ID, ORGANIZATION_CODE JE_BATCH NAME Post Journals Form
REFERENCE2 Insert GL_BATCH_DATE, ORGANIZATION_CODE, ORG_GL_BATCHES.DESCRIPTION, JE_BATCH DESCRIPTION Post Journals Form
REFERENCE3 DO NOT POPULATE Use unknown
REFERENCE4 DO NOT POPULATE JE_HEADER NAME Account Analysis Report, Account Inquiry
Note: Journal Import will append JE_CATEGORY_NAME, CURRENCY_CODE
REFERENCE5 Same as REFERENCE2 JE_HEADER DESCRIPTION Account Inquiry
REFERENCE6 DO NOT POPULATE JE_HEADER external_reference
REFERENCE7 DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_FLAG
REFERENCE8 DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_PERIOD_NAME
REFERENCE9 DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_CHANGE_SIGN_FLAG
REFERENCE10 Same as REFERENCE2 JE_LINES DESCRIPTION General Ledger Report, Journal Entry Inquiry
REFERENCE21 Insert GL_Batch_ID GL_JE_LINES.REFERENCE1 Not Displayed
REFERENCE22 Insert ORGANIZATION_CODE GL_JE_LINES.REFERENCE2 Not Displayed
REFERENCE23 Insert TRANSACTION_ID GL_JE_LINES.REFERENCE3 Not Displayed
Slide 28
List of Month-End Close Reports
Material Distribution Detail/Summary Reports
WIP Account Detail/Summary Reports
Receiving Account Distribution Report
Purchase Price Variance Report
Invoice Price Variance Report
Discrete Job Value
Repetitive Value Report
Expense Job Value Report
Margin Analysis Report
Slide 29
Month-End Close Reports (Cont’d)
Inventory Value Reports
Elemental Inventory Value Reports
Intransit Value Report
Subinventory Account Value Report (disabled in Release 12)
All Inventories Value Reports
Receiving Value Report
Receiving Value by Destination Report (disabled in Release 12 – unable to view the perpetual expense balances)
WIP Value Report
Period Close Value Summary Report
Period Close Reconciliation Report (11.5.10 and 12)
Slide 30
Common Reconciliation Challenges
Release 11i only: report cut-off issues at month-end or running multiple periods at a time
Account alias or miscellaneous inventory transactions using same accounts
Disabling a code combination during the month
Subledger miscodings
Manual G/L journal entries
Back-dated transactions from external system feeds
Miscoded purchase orders
Delivering goods to a closed work order
Slide 31
Common Reconciliation Challenges (Cont’d)
Sharing System Accounts: Expense and Inventory Accrual Accounts Receiving Valuation Accounts Organization Level Accounts (Average, FIFO, LIFO Costing) Subinventory Accounts (Standard Costing) Cost Group Accounts (Project Mfg, WMS) WIP Accounting Classes Inventory Account Aliases Order Types and COGS Release 12 Subledger Accounting Rules causing you to share
accounts
Release 11i: wrong initial subinventory summary balances
Initial legacy GL balances to do not match Oracle perpetual
Slide 32
Slide 33
R12 Improvements Period Close Diagnostics
Forms Drilldown• Using the same Inventory Accounting Periods form you can
drilldown to associated forms to view the problem transactions
New workflow to notify of failing transactions
Period Close Pending Transactions Report• Report the transactions holding up the inventory accounting
period• Only by inventory organization and only by transaction error
The following reports can now be run with an As-of Date:
Inventory Value Report – By Subinventory Inventory Value Report – By Cost Group Elemental Inventory Value Report – By Subinventory Elemental Inventory Value Report – By Cost Group All Inventories Value Report All Inventories Value Report – By Cost Group Intransit Value Report Receiving Value Report
Reconciliation Improvements in R12
Slide 34
Many of these reports are also available in R12 as XML reports
R12 Challenges – Inventory Reconciliation
Inventory Reconciliation May have more inventory reconciliation issues in R12
Issues Common to Release 12 and 11i The differences between the perpetual and accounted-for
inventory balances are trapped in a table the users don’t see
Limited use for the Period Close Reconciliation Report• Most users and analysts don’t know about it• Limited to a single warehouse• Shows zero quantity items – which is not efficient
Need a Multi-Org Perpetual vs. Accounted-For Report
Slide 35
R12 Challenges – Inventory Reconciliation
Sample Period Close Variances Report
From the CST_PERIOD_CLOSE_SUMMARY table
You can also use this information to get your month-end perpetual quantities and values for intransit and subinventories
Slide 36
New Reconciliation Challenges in R12
Subledger Accounting and Inventory Reconciliation
Which accounts represent inventory and WIP valuation?
Harder to reconcile manually with no valuation accounts on the Inventory Value or Receiving Value Reports
Receiving Value by Destination Account Report is disabled
Release 12 dropped the valuation accounts on most inventory reports
Slide 37
R12 Material and WIP Distribution Inquiries and Reports
Release 12 mat’l and WIP distribution inquiries & reports do not reflect the SLA results
SLA Journal Reports do not show operational information
Release 12 records the material accounting and WIP accounting entries by cost element – rendering these inquiries and reports more difficult to use, especially for Standard Costing.
Release 12 forces Standard Costing to record WIP & Material entries by Cost Element / you can summarize in SLA but you
don’t have the same detail reporting in SLA
Slide 38
SLA Accounting Tables
Enter Transaction(s)
Transaction Accounting Tables
AccountingProcessor
XLA_AE_HEADERS
XLA_AE_LINES
XLA_DISTRIBUTION_LINKS
XLA_EVENTS
Module Specific
Transaction Accounting
Tables
Create Accounting
G/L Tables
GL_LEDGERS
GL_JE_HEADERS
GL_JE_LINES
GL_JE_BATCHES
One Common Accounting Subledger
Table
GL_INTERFACE
ReceivingMaterial
WIP
Basic Table Structure for SLA
Slide 39
Custom Solutions for Multiple Organizations
Common Custom Reports and Desired Enhancements
Multi-Org Material Account Summary Report Multi-Org Receiving Account Summary Report Multi-Org WIP Account Summary Report Multi-Org All Inventories Value Report Multi-Org Inventory Value Report Multi-Org Receiving Value Report Multi-Org Expense Value Report Multi-Org WIP Value Report Multi-Org G/L to Inventory Reconciliation Report
Slide 40
Desired Enhancements (Cont’d)
Eliminate the two layers of accounting entries in R12
Put the Inventory and Receiving Valuation Accounts back on the valuation reports
Add a standard report or alert to find the miscellaneous inventory transactions that are causing an out-of-balance
Simplify, make more robust, or eliminate the interfaces needed in Oracle (especially the Receiving Interface)
Slide 41
Desired Enhancement:G/L to Inventory Reconciliation Script
Just think how much time this would save …
Slide 42
Sample G/L to Inventory Reconciliation Script
Selects and compares:
Selects the cumulative G/L balances by journal source Selects the cumulative Inventory (stores) and Intransit
perpetual balances from the month-end snapshot Selects the cumulative WIP balances Compares the three above balances and reports
differences Runs in under 2 minutes for 6 ledgers with 60 inventory
orgs R11i, change GL_LEDGERS to GL_SETS_OF_BOOKS
Slide 43
Sample Reconciliation Script (Cont’d)
Automatically Compares: G/L to Inventory Perpetual G/L to Intransit Perpetual G/L to WIP Period-End Balances
Caveats: Tested for Standard Costing (should work for Avg, FIFO,
LIFO) Assumes using product line or product group segment from
your item master COGS account Does not consider Cost Groups Assumes using one valuation account per subinventory or org Your Release 12 Subledger Accounting Rules may be
different
Slide 44
G/L to Inventory Reconciliation Data Flow
Compare Balances by Full Account
Period End Cost Snapshot Tables
CST_PERIOD_CLOSE_SUMMARY
WIP_PERIOD_BALANCES
General Ledger Tables
GL_LEDGERS (R11i: GL_SETS_OF_BOOKS)
GL_BALANCESGL_JE_HEADERS
GL_JE_LINESGL_CODE_COMBINATIONS
LEGENDCosting & WIP tables General Ledger tables
Report Output
Slide 45
G/L to Inventory Reconciliation Lookup
Uses a lookup type to identify the inventory reconciliation accounts
Slide 46
G/L to Inventory Reconciliation Report
These concepts work for AVG and STD Costing, for both Release 11i and 12
Slide 47
Summary
Release 12 solves many of the report cut-off issues
Still have multi-org reporting issues with account distribution and valuation reports
Release 12 Subledger Accounting can complicate reconciliation
Investments in custom reporting can save significant amounts of time at month-end
Slide 48
Send Email Address to Get the Following:
Mention which release, costing method, and if using separate accounts by cost element
Sample reconciliation excel spreadsheet
Comparison Script between the G/L and Inventory Perpetual Values
Informal workshops can be arranged
Slide 49
Slide 50
Acknowledgements
Oracle Cost Development
Partners in crime at my many clients
Slide 51
Douglas Volz ([email protected])
Professional Background
Doug Volz is a Senior Architect and Advisor for Oracle Application projects, with a particular interest in Cost and Project Management. He has 30 years accumulated experience, including 5 years in Oracle Development (co-designing Oracle Cost Management) and 12 years in industry in Cost and Accounting Management positions. His Manufacturing and Cost systems experience covers project management, software design/development, delivery and consulting services, for both Oracle Corporation, and multiple international consulting firms. Prior to his systems career, Mr. Volz also held numerous management accounting positions for telecommunications, defense, and electronics companies.
In his consulting roles Doug has served over 100 clients. Many of these were multi-org, multi-currency with global footprints. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, P.R.O.C., Norway, Japan, Italy, Switzerland and Germany.
Doug leads the OAUG Cost Management Special Interest Group. He also advises and participates on the Oracle Customer Advisory Board for Fusion Costing.
Core Expertise Multi-organization, Multi-currency ERP
Implementations Project Management and Senior Project Advisor Core manufacturing processes
Cost Management Inventory Bills of Material WIP
Systems Integration and Data Conversions
Experience Sample of clients served:
Beckman Coulter (US) Matsushita (UK, Mexico) NTL (UK, now Virgin Media) Logitech (US, Taiwan, P.R.C.) Celgene Corporation (US, Switzerland) NTL (UK, now Virgin Media) TCI International (US) Onninen AS (Norway)
Slide 52
Thank You for Your Attendance and Participation
