How to Reconcile Your Manufacturing Month-End Close

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How to Reconcile Your Manufacturing Month-End
Close

• Douglas A. Volz
• Sharon L. Widmer
• October 1998

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Update for May 2007

• While at KPMG, Doug first wrote this in 1998.
  This version is from a co-presentation with
  Sharon Widmer, a valued friend and co-worker from
  KPMG/Bearingpoint.
• Starting in Release 11.5.10 (or 11.5.9 plus
  patches), the period close processes will
  snapshot your month-end inventory balances.
• However, even with this new functionality the
  snapshot does not consider receiving inventory,
  nor does it provide useful month-end inventory
  valuation reporting. The only new report is a
  period close reconciliation report, automatically
  generated when you close your inventory
  accounting period.
• Doug has helped over 40 clients with
  reconciliation challenges, from detailed
  diagnoses, training sessions, custom
  reconciliation reports and assistance with
  streamlining month-end close processes. His
  reconciliation experience started with early
  Oracle clients in Release 9 and continues up to
  present versions.

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Reconciliation Agenda

• General Reconciliation Principles
• Receiving Valuation Accounts
• Inventory Valuation Accounts
• Work In Process Valuation Accounts

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There Has to be an Easier Way !!
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General Reconciliation Principles

• Use the following formulaPrior cum. balance
  monthly accounting activity month-end
  cumulative G/L balance
• Also compare above formula to cumulative report
  balances
• If you do not balance, check for manual G/L
  journal entries and entries from other subledgers

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More Reconciliation Principles INV, Receiving,
and WIP

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

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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

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How to Balance the Inventory (Stores)Valuation
Accounts

• Use the Inventory Valuation Reports to get the
  month-end balances
• You can also use the Transaction Historical
  Summary Report
• Also use the Period Close Value Summary Report,
  for a double check
• Use the Material Distribution Summary Report for
  monthly totals

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What to Check If the Inventory Accounts Do Not
Balance

• Check for miscellaneous inventory transactions,
  where the offset account is the same as the
  subinventory valuation account
• Use the Transaction Distribution Inquiry to find
  these, query for entries that hit your
  subinventory valuation accounts, but the
  Accounting Line Type is Account

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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

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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

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Report Drill-Down to the General Ledger

• The Inventory/WIP GL batch numbers are visible in
  the G/L, as part of the journal entry batch name
• You can run the Material and WIP Distribution
  Reports by this G/L batch number and compare to
  the General Ledger
• In R10.7 GUI you can drill down by GL Batch in
  the Inv. GL Transfers Screen

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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

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Month-End Close Reports (Contd)

• Inventory Value Report
• Intransit Value Report
• Subinventory Account Value Report
• All Inventories Value Report
• Receiving Value Report
• Receiving Value by Destination Report
• WIP Value Report
• Period Close Value Summary Report

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Common Problems

• Uncosted material transactions in
  MTL_MATERIAL_TRANSACTIONS
• WIP labor/overhead transactions stuck in
  WIP_TRANSACTIONS
• Stuck PO receipts in RCV_TRANSACTIONS_INTERFACE
• Report cut-off issues at month-end
• Running multiple periods at a time, and
  back-dating transactions

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Common Problems (Contd)

• For GUI, Wrong System Account for Receiving
  Accrual Account field
• Not correctly initializing the subinventory
  summary balances for first period close
• Not reclassifying the initial legacy GL balances
  to match Oracle system
• Release 10.7 Period Close Bug - 667196 (usually
  for Average Costing)

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Desired Enhancements

• Add a close date parameter to the Discrete Job
  Value Report, to facilitate running the report
  for all closed jobs at month-end
• Create a system balancing/comparison report to do
  this work for you

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Desired Enhancements (Contd)

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

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Send Email Address to Get the Following
Scripts/Papers

• Interface script - review interface tables
• Uncosted transactions instructions
• SQL script to list entries in the
  RCV_TRANSACTIONS_INTERFACE table
• Latest paper on the AP Accruals (updated from
  1996/97 OAUG conf.)

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Thank You for Your Attendance and Participation

• Douglas A. Volz
• Sharon L. Widmer