Inventory Analysis and CDD

2011 National Conference

Inventory Analysis and CDD

2011 National Conference

Agenda

• Review 4 sided vs 2 sided G/L entries

• Things that will cause large month end adjustments

• Eagvantage margin analysis

• Inventory Receiving

• Month end adjustments

• Icost file

• Inventory CDD

2-Sided Entries

Inventory

When you bring an item in through an Inventory Receiver the following entry is made:

Debit 504010 $500 Soybean Meal Purchases

Credit 200200 $500 Inventory Received not Invoiced

2-Sided Entries

Sales

When you Sell an item the following entry is made:

Debit 404010 $500 Soybean Meal Sales

Credit 101010 $500 Accounts Receivable

4-Sided Entries

Inventory

When you bring an item in through an Inventory Receiver the following entry is made:

Debit 104010 $500 Soybean Meal Inventory

Credit 200200 $500 Inventory Received not Invoiced

4-Sided Entries

Counter Invoicing

When you invoice the item in Counter Invoicing the following entry is made:

Debit 101010 $600 Accounts Receivable

Credit 404010 $600 Soybean Meal Sales

Debit 504010 $500 Soybean Meal Cost of Sales

Credit 104010 $500 Soybean Meal Inventory

Advantages of 2-Sided Entries

• Incorrect cost of sales are fixed at the end of the month adjustments.

• Margin adjustments on products that are not inventoried.

Disadvantages of 2-Sided Entries

• You can’t see what cost of sales your sales are getting.

– You generally don’t realize you have erroneous cost of sales until it is to late to correct them easily.

• Need to make month end adjustments before printing financials.

– Generally based on margin % which leads to large journal entries when adjusting to actual inventory.

• When you run sales analysis you may have erroneous cost of sales.

Advantages of 4-Sided Entries

• Inventory GL accounts (Assets) are always up to date• Cost of Sales and Purchase accounts are always up

to date • Can run financial statements anytime during the

month and have relatively complete information• Financial statements closely match sales reports.• Reduces the need to create GL inventory adjustments

at the end of each month– Still probably want to do them to account for times when the product

is sold prior to the purchase. If the cost changes significantly.

Disadvantages of 4-Sided Entries

• You really need to be using inventory or the cost of sales will be erroneous.

– Although the new margin function can eliminate this.

• If you turn this on without properly preparing, your financials will be erroneous.

Causes of big adjustments

• Dropped receiving records

• Item transfer # issues

• Blends not set up right

• Posting accounts payable invoices directly to GL accounts

• Date of receiving/transfers do not match GL month

Eagvantage Online reporting

• Management tools

• Sales information

• Sales by department/fine line code

• Can drill down for departments/fine line codes margins out of line

• Include unmerged to get a jump start on errors before they are merged

Receiving

• Most errors caught here before being merged

• Retail price established here

• Margin not correct must be fixed

• Receivers must be merged before sale

• Dropped duplicate receivers

• Purchase factors

Monthly Journal entries

• General ledger - journal processing – Enter Inventory adjustments (set up needed)

• Inventory – Inventory Reports – Summary Inventory Report in GL Sequence

Summary Inventory Report by GL

Journal entries for Inventory Adjustments

Icost file

• Quantity should balance to actual count– Base on Merged as the U8ICOST on purchases is updated in

the merge

– If the cost is wrong manually fix it as backing out and putting back in will not necessarily fix the u8icost file.

• V7 puts costs in U8icost for last cost valuation.

• Negative quantities in file causes incorrect costing

Summary

• Earlier the problem is identified the less the impact is on the margin

• Once error identified can take months to clear up

• Takes a long time to fine tune the reports to run with very few errors

• Must be willing to be ‘close’

• Team commitment from item setup, to receiving, to sales

THANK YOUTHANK YOUPlease fill out yourevaluation forms

Please fill out yourevaluation forms