Inventory Control - Flow of Processing
Inventory Period End Processing
Overview (return to top)The Flow of Processing section helps you learn how to operate the software for the first time and provides guidelines for operating the module after it is installed. Study this section in conjunction with the Operations section of this help document.
The Inventory Control module is tied very closely to the Sales Order Processing, Bill of Materials, Shop Floor Control, and Purchase Order modules. The Inventory Control module is designed to record all inventory transactions from these other modules, as well as adjustments, issues, receipts, and physical inventory processing. You should understand how the other modules work to obtain a complete picture of how inventory transactions are processed. If you are using these other modules, refer to their documentation as necessary.
Flow of Daily Processing (return to top)Daily processing refers to the procedures performed each day while using the Inventory Control module, such as recording transactions, transfers between warehouses, and price changes to inventory items.
Inventory transactions are divided into two major categories: manual and automatic. Manual transactions are those you enter and update using the Inventory Control module. Automatic transactions are those generated automatically from tasks in other modules, such as Purchase Order Receipts or Sales Register Update.
Sales analysis information for inventory transactions (recorded in the Sales Analysis module) is updated automatically during the Sales Register update in the Sales Order Processing module. Sales history is kept at various levels of detail, depending on how the parameters are set in the Sales Analysis and Accounts Receivable modules. No sales analysis information is updated from manual inventory transaction processing.
Manual Transactions (return to top)The frequency with which manual transactions are posted determines how accurately the Inventory Control module represents the status of your physical inventory at any point in time. If necessary, you may post transactions every day, or even several times a day. In actual practice, it is more likely that you will collect several days’ transactions and enter them into inventory at one time.
To gain the most benefit from your Inventory Control module you must accurately and consistently track your inventory. For every physical movement of an item in the inventory, there must be a computer transaction reflecting what happened. Without this, you cannot keep the inventory up to date on the computer.
Adjustments, Issues, Receipts, CommitmentsIn maintaining the Inventory Control module, the most common types of manual transactions are adjustments (both positive and negative), issues, receipts, and commitments.
Adjustments record any general purpose change in inventory quantities. Adjustments either increase or decrease the inventory quantities depending on the situation.
Issues record the movement of items out of inventory, though negative issue transactions may be made. Some common examples of issue transactions are moving items from finished goods to production or to a job, sending parts outside for special processing, or transferring items for internal use. They may also be used to record the sale of items, or their return. When the Sales Order Processing module is installed, inventory quantities are automatically reduced during the invoice update process.
Receipts record the receiving of items into inventory, generally from the vendor or supplier. This type of manual transaction is used when the Purchase Order Processing module is not installed, though it may be used in conjunction with it.
Commitments refer to the “reserving” of inventory items, so that they may be deducted from the quantity on hand amounts. An inventory item is committed automatically when it is entered as a line item on a sales order. This ensures that the same quantities cannot be ordered by more than one customer. You can make manual commitment transactions at any time, thus reserving or “committing” items when setting up a sales order is not appropriate.
For more information on how these types of transactions affect your inventory, and possibly the general ledger, please refer to the Operations section for both the Transaction Code Maintenance and Inventory Transaction Entry tasks.
Enter TransactionsEnter transactions directly from the source documents on which the physical transactions are recorded. Immediately following this, print registers for each batch of transactions before updating. This provides the capability to make corrections easily, and produces a printed audit trail of all manual transactions. Any adjustments to previously updated transactions are made using the same process.
Transfer InventorySometimes a company has multiple warehouses store their inventory. Use the Inventory Transfer Entry task to record any transfer of inventory items from one warehouse (location, store, etc.) to another.
Change Inventory CostsThe cost of an item can be maintained in the Inventory Item Maintenance /Vendor Detail task. Costs are also changed when items are received through the Purchase Order System. If the Inventory Costing Method parameter is set to S, you would use the Cost Change Entry task to change the cost of several items in your inventory at once.
Alternatively, you can use the Cost Change by Percentage task when a percentage cost change is made for all items purchased from a single vendor, or for an entire group of products. Both tasks change costs based on an effective date.
When you make changes to the cost of your inventory, you need to post those changes to the General Ledger. Depending on whether you have a manufacturing or non-manufacturing environment, different steps are taken to enter the postings.
Cost Changes in a Non-Manufacturing Environment
Cost Changes in a Manufacturing EnvironmentIn a manufacturing environment, cost changes are generally entered for components only and rolled up into the finished goods.
Change Inventory PricesPrice changing provides a controlled method of altering list prices for inventory items. There are two ways to change inventory prices. Usually, the price of an item is maintained in the Inventory Item Maintenance task. But you may also use the Price Change Entry task to change the price of several items in your inventory at once.
In addition, you can use the Price Change by Percentage Entry task when a percentage price change is made for all items purchased from a single vendor, or for an entire group of products. Both tasks change prices based on an effective date.
NOTE: If sales orders still need to be processed with the current price, delay the update until all orders have been entered.
Print Inventory ReportsEach inventory report can be printed on demand. How often you print these reports depends on your individual needs as well as how up to date you keep your inventory. Not all reports may be meaningful for your firm. You should, however, print each one once to review the format and contents. In addition to the information on the reports, the size and organization of your inventory will affect the way you use them.
Price ListCreates a list of inventory items in item number sequence indicating prior and current list prices, list price codes, and profit margin information. The report can be printed for a specific product code or for all product codes.
Inventory Vendor ListingCreates a list of inventory items purchased from a specific vendor, or from all vendors, in vendor number sequence. Vendor part numbers, purchase information, and usage information is shown for each item.
Inventory Requirements ReportThis report is a list of all primary inventory items for vendors and includes information necessary to make purchasing decisions. The report may be created for a single vendor or for all vendors, and displays in vendor number sequence.
Inventory Analysis ReportThis report is a listing showing the analysis of selected inventory items. Items are ranked by percentage of total sales or by usage within a selected period. You can display the information by item, which gives you item information for all warehouses, or by a single warehouse location.
Inventory Stock Status ReportThis is a list of inventory items and information regarding location, unit cost, quantity on hand, quantity committed, quantity available, quantity on order, and total value. All or selected items may be created in warehouse and item number sequence. The report may be run for a specific warehouse and product code, if desired.
Inventory Activity ReportThis report shows the activity of inventory items within a selected period. You can display the information by item, which gives you item information for all warehouses, or by a single warehouse location.
Stock Movement ReportThis is a list of all inventory items showing a summary of transaction activity and estimated annual usage. The report displays in item number sequence and can be selected by warehouse and product code. It is helpful in analyzing issues for an item over different time periods.
Inventory Reorder & Shortage ReportThis report is a list of all or selected items whose available quantity has fallen below the reorder point or safety stock level. The report should be created frequently to keep current with reorder needs and desired count. You may select items to review within a specific warehouse or product category.
Inventory Turns ReportUse this report to create a listing showing the turnover of your inventory items for a specified period and year. You can also request that only items above or below your turns limit are displayed. Information can be displayed by item, which gives you item information for all warehouses, or by a single warehouse location.
Inventory Zero Balance ReportPotential inventory shortages or computer errors can be averted with Inventory Zero Balance Report. All out of stock inventory items may be shown, or only those that became zero balance since a given date. Physical verification of the out of stock items that appear on this report can be used to complement inventory cycle counting.
Inventory Transaction History ListingHistorical inventory transactions may be listed for all or selected items. Inventory transactions include those from manual inventory processes such as physical counts, period-end processing, or transactions, as well as those from other modules. A date range, warehouse code, and specific transaction code may be specified.
LIFO/FIFO Tier ReportThe FIFO or LIFO inventory costing method parameter must be used in order to create this report. The report displays a listing of LIFO/FIFO tiers showing on-hand quantities and costs for each inventory item within a specified date range. Subtotals for items, products, and warehouses are displayed, together with an overall total.
Synonyms ListingThis reports is a listing of the synonyms assigned to your inventory items. You can produce this report by item with synonym or by synonym with item. Use this report to verify the different synonyms you have used to group your items.
Alternate/Superseded Items ListingThis report is a listing showing alternate or superseded items by item number within a selected product code. Use it to determine which items can be, or have been, replaced by others.
Inventory Description ListingThis report shows all items and their respective descriptions. Use it for verifying like items.
Item Detail ListingThis report shows the item master information for a selected item or a range of items. Details such as warehouse location, stocking level, cost information, and so forth, is displayed along with any comments associated with the item(s).
Inventory Item LabelsUse this report to create labels for any or all of your inventory items. The labels can display your company name, the item number, the item description and product type, the cycle code, and the location.
Physical Count Processing (return to top)Use physical count processing when first entering inventory quantities into the module, as well as periodically thereafter whenever physical inventory counting is required. With this process you can enter and review new counts for each of your inventory items without immediately affecting existing quantities that are in the Inventory master file.
Select InventoryA special feature of the physical inventory count process is that it may take place without having to suspend normal Sales Order or Purchase Order processing on the computer. This is especially important when dealing with a large inventory that might take several days to count, enter, verify, and update.
When the inventory is selected for counting, a special file is created that records the inventory on hand information as of that point in time. This file may be thought of as an “inventory freeze file” because it creates a separate record of the on hand quantities as of the time of selection. The remaining steps of the physical inventory process are then performed as usual, but with these “frozen” counts as a reference point.
Transaction processing with the computer can proceed as normal, without altering the on hand quantities used by the physical count process. Of course, no product should be removed or added to the warehouse until the physical counting is completed and verified.
Any variances that are reported on the physical count register are based on the freeze file. Any adjustments that are made during the physical count update are calculated using the quantities from the freeze file, but are updated to the Inventory master file. This allows other transactions, both manual and automatic, to be posted to the Inventory Control module as the physical inventory is being taken, and during the data entry stage, without affecting the record of on hand quantities that existed when the count sheets were printed.
Be sure to refer to the Operations section for physical inventory processing when performing the following steps.
Inventory Period End Processing (return to top)Period end processing refers to the software operations performed at the end of each accounting period to close that period. These steps are the same for each period in the fiscal year, including the last period.
As part of the period end processing, the Current Period parameter for the Inventory Control module is incremented. Normally, you would not be able to close a period twice except by running the Parameter Maintenance task and resetting this parameter. As part of the closing for the last period of the year, the Current Year parameter is incremented.
There are no separate steps for the year end closing of Inventory Control. This is accomplished automatically when running period end processing for the last period of the year. The following pages detail the period end procedures.
The Inventory Control module must be closed before the General Ledger period end processing can be run for the corresponding period. In actual operation, it is not uncommon for the general ledger to be several periods behind the Inventory Control module being closed. Due to the design of the software, this does not impair operation of either module.
Review Inventory Transactions
Review all inventory transactions for the month by checking each of the following items:
Print Monthly Analysis Reports
Print the analysis reports available to the Inventory Control module.
File the reports for the proper period and give copies to the manager in charge of inventory.
Perform Period End Update
CAUTION: All transactions for the period must be recorded and all period end reports should be printed before beginning the update.
When you are certain that all processing for the period is completed, proceed with the Period End Update. The update has the following effect on the module:
Processing Checklist (return to top)Daily Processing____ Enter Transactions ____ Transfer Inventory ____ Change Inventory Costs ____ Change Inventory Prices ____ Print Inventory Reports Physical Count Processing____ Select Inventory ____ Print Count Sheets for selected items (or all) ____ Perform Inventory Counting ____ Enter Physical Counts ____ Print Inventory Count Register ____ Update Physical Counts Period End Processing____ Review Inventory Transactions ____ Print Monthly Analysis Reports ____ Period End Update ______________________________________________________________________________________ Copyright BASIS International Ltd. AddonSoftware® and Barista® Application Framework are registered trademarks. |