Flow of Processing  Inventory Control

Overview

Flow of Daily Processing

Manual Transactions

Physical Count Processing

Inventory Period End Processing

Processing Checklist

 

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, Commitments

In 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 Transactions

Enter 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.

 

  1. Gather transaction forms or documents on a daily basis, making sure information is recorded for each of the following types of transactions:

    1. Issues of stock from inventory (other than what is updated through Sales Order Processing).

    2. Adjustments to inventory quantities.

    3. Adjustments to committed quantities.

    4. Receipt of inventory items (when the Purchase Order module is not used).

  2. View the transaction information and determine what to include in the entry. Pertinent information for transaction entry includes:

    1. Determining the warehouse identification code where the transaction took place.

    2. Verifying the date of the transaction.

    3. Determining the inventory item number of each transaction.

    4. Determining the transaction type (adjustment, commitment, receipt, issue).

    5. Checking the reference control number (voucher, ticket, order number) for each transaction.

    6. If the Bill of Materials module is being used, determine if the transaction should be recorded with that module’s Production Entry task.

  3. Enter the transactions using the Inventory Transaction Entry task. Mark each transaction form or document posted to computer immediately after you enter it.

  4. Print the Inventory Transaction Register after you enter all transactions. This register shows all transactions entered since the last register was updated.

  5. Verify the data on the Inventory Transaction Register. If anything was omitted or entered incorrectly, use the Inventory Transaction Entry task to make adjustments. Reprint the register and check it again. If you print more than one register for a batch, keep only the latest copy.

  6. When the Inventory Transaction Register is correct, enter Yes to the update prompt. This process updates inventory quantities, and optionally posts to the General Ledger Daily Detail file, depending on how you defined the inventory transaction codes.

  7. After the update is complete, file the transaction forms and the Inventory Transaction Register.

 

Transfer Inventory

Sometimes 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.

 

  1. Collect inventory transfer information on a daily basis and keep in a file marked inventory transfers to be posted.

  2. When you have collected a batch of transfers, prepare them for entry. Pertinent information for transfer entry includes the following:

    1. Determine the warehouse codes of the from and to warehouses.

    2. Verify the inventory transfer date.

    3. Determine the quantity of the transfers and note the cost per unit.

    4. Determine the reference or control number of the transfer.

  3. Calculate the transfer totals (quantity times price) before posting the transfers.

  4. Enter the transfers using the Inventory Transfer Entry task. Mark each transfer form or document posted to computer immediately after you enter it.

  5. Print the Inventory Transfer Register after you enter all transfers. This register shows all transfers entered since the last register was updated.

  6. Verify the data on the Inventory Transfer Register. If anything was omitted or entered incorrectly, use the Inventory Transfer Entry task to make adjustments. Reprint the register and check it again. If you print more than one register for a batch, keep only the latest copy.

  7. When the Inventory Transfer Register is correct, enter Yes to the update prompt. The warehouse quantity information in the Inventory Master File is updated.

  8. After the update is complete, file the transaction forms and the Inventory Transfer Register.

 

Change Inventory Costs

The 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.  

  1. Collect cost change information for inventory items on a daily basis and keep in a folder marked cost changes to be entered.

  2. Enter the cost changes using the Cost Change Entry or Cost Change by Percentage tasks. Mark each cost change form or document posted to computer immediately after you enter it.

 

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

  1. In a non-manufacturing environment (i.e., when there is no Bill of Materials cost roll-up process), print the Cost Change Valuation Report. Use the general ledger summary of the report to determine the general ledger postings needed after the Cost Change Register update.

  2. Print the Cost Change Register after you have entered all cost changes. This register shows all cost changes and their effective dates entered since the last register update.

  3. Verify the data on the Cost Change Register. If anything was omitted or entered incorrectly, use the Cost Change Entry task to make adjustments. Reprint the register and check it again. If you print more than one register for a batch, keep only the latest copy.

  4. When the Cost Change Register is correct, enter Yes to the update prompt. The Inventory Master File is updated and all further cost calculations are based on the new figure.

 

Cost Changes in a Manufacturing Environment

In a manufacturing environment, cost changes are generally entered for components only and rolled up into the finished goods.

 

  1. Print the Inventory Valuation Report on the Period End Processing menu.

  2. Print and update the Cost Change Register.

  3. Perform the Bill of Materials cost roll-ups (Bill of Materials Inventory Costing) to change the costs of the finished goods.

  4. Reprint the Inventory Valuation Report. Use the differences between the two reports to determine the general ledger postings required to adjust the Inventory account(s) and the Purchase Cost Variance or Cost of Sales account(s).

 

Change Inventory Prices

Price 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.

 

  1. Collect price change information for inventory items on a daily basis and keep in a folder marked price changes to be entered.

  2. After a batch of price change forms have been collected, prepare them for entry by establishing a new price list number to identify the change.

  3. Enter the price changes using the Price Change Entry or Price Change by Percentage tasks. Mark each price change form or document posted to computer immediately after you enter it.

  4. Print the Price Change Register after you have entered all price changes. This register shows all price changes and their effective dates entered since the last register was updated.

  5. Verify the data on the Price Change Register. If anything was omitted or entered incorrectly, use the Price Change Entry task to make adjustments. Reprint the register and check it again. If you print more than one register for a batch, keep only the latest copy.

  6. When the Price Change Register is correct, enter Yes to the update prompt. The Inventory Master File is updated and all further price calculations are based on the new figure.

 

NOTE: If sales orders still need to be processed with the current price, delay the update until all orders have been entered.

 

Print Inventory Reports

Each 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 List

Creates 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 Listing

Creates 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 Report

This 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 Report

This 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 Report

This 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 Report

This 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 Report

This 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 Report

This 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 Report

Use 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 Report

Potential 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 Listing

Historical 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 Report

The 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 Listing

This 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 Listing

This 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 Listing

This report shows all items and their respective descriptions. Use it for verifying like items.

 

Item Detail Listing

This 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 Labels

Use 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 Inventory

A 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.

 

  1. Select the items for counting.

    Use the Select Cycles for Freeze task to select the portion of the inventory to be counted by specifying one or more cycle codes. Each item has a cycle code entered on the Item Warehouse record.  Be sure that any changes to item/cycle codes have been made before items are selected.

    This process is more accurate if all inventory related transactions are updated before you begin. This includes the invoice update from the Sales Order Processing module, receipts from the Purchase Order module, warehouse transfers, and manual inventory transactions from the Inventory Control module.

  2. Print the Physical Inventory Count Sheets.

    Physical count sheets contain a list of the items to be counted, and provide a worksheet for the actual counting of the inventory. After the counting is complete, they serve as data input sheets for the data entry process. They may be printed for the entire inventory (by warehouse), or only for items with selected inventory cycle codes. Count sheets are printed in cycle and bin location sequence to help speed the counting process.

  3. Take a physical inventory count of the items shown on the count sheets. Record the quantity on hand on the blank lines provided on the count sheets.


NOTE: During the counting of inventory, there should be no physical movement of items either in or out of the building. After the count is completed and verified, the inventory may be used as usual. During this time, you may continue to post both manual and automatic transactions to the Inventory Control module because of the freeze file created when count sheets are printed.

  1. Make an adding machine tape of all quantity on hand totals before entering any of the counts into the computer.

  2. Enter the new physical counts using the Physical Count Entry task. Check off each quantity on hand figure on the physical count sheets as it is entered. If the computer quantity appears on the count sheet, only counts that are different from the computer need to be entered.

  3. Print the Physical Inventory Register (Register and Update task) when all physical counts included within the cycle are entered. The Physical Inventory Register shows the actual on hand figure, the computer on hand figure (from the freeze file), and the calculated variance between the two.

  4. Verify the data on the Physical Inventory Register. If anything was omitted or entered incorrectly, use the Physical Inventory Entry task to make adjustments. Reprint the register and discard the previous one.

  5. When the Physical Inventory Register is correct, enter Yes to the update prompt. The inventory file is updated to show the new physical count, with an automatic posting of an adjustment to each item where the computer’s on hand quantity was different than the physical on hand quantity.

  6.  After the update is complete, file the count sheets and register.

 

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:

  1. Have all inventory transactions been recorded for the month?

  2. Have all inventory transfers been recorded for the month? (If multiple warehouses.)

  3. Have all price changes been entered?

  4. Has the physical count been done? (If applicable.)

 

Print Monthly Analysis Reports

 

Print the analysis reports available to the Inventory Control module.

 

  1. Print the Inventory ABC Analysis Report. The ABC Analysis Report prints a list of all items, sorted in sequence by either on hand value or historical usage. Each item falls into either a high, middle, or low category (A thru Z) depending on where it falls in the sequence and what percentage values have been assigned to the code within the Inventory Factors option of the Parameter Maintenance task. Based on the ranking of items on this report, each item may be automatically assigned a new ABC code.

  2. Print the Inventory EOQ, Order Point & Safety Stock analysis report. The report prints a list of all inventory items indicating old EOQ, order point, and safety stock amounts, and calculates the new EOQ, order point, and safety stock amounts. These new amounts are then updated to the inventory file.

  3. If the FIFO or LIFO inventory costing method is being used, print the tier diagnosis report on the Inventory Utilities menu.  The report shows the on hand balance and the total balance in tiers for each inventory item in a selected warehouse.  If there are significant differences between on hand balances and tier balances, adjustments may be made using either the adjust LIFO/FIFO tiers task or the clear and rebuild tiers task on the Inventory Utilities menu.  Any adjustments should be made before printing the Inventory Valuation Report. For a more complete explanation of these tasks, refer to the Inventory Utilities Menu in the Operations section of this help document.

  4. Print the Inventory Valuation Report. This report indicates the value of all inventory items by using the unit cost times the on hand quantity, or by extending the LIFO/FIFO quantities if used. The report can be printed for an individual warehouse.

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:

 

  • Closes the selected accounting period for the Inventory Control module only.

  • Generates a Beginning Balance Transaction in the Inventory Transaction History file.

  • Updates Beginning Balances for the Warehouse Period History file.

  • Increments the current period parameter.

  • If closing the last period in the fiscal year, the current year parameter is incremented.

 

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



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