Inventory Reconciliation Process

Inventory Reconciliation Process Steps

  1. System Utilization: Utilize two main systems for inventory tracking:

    • XA: For raw materials and semi-finished goods.

    • LN: For finished goods.

  2. Report Extraction: Extract inventory reports from both the LN and XA systems.

  3. Initial Comparison: Compare the extracted system reports against the inventory figures recorded in the accounting system.

Specific Reconciliation Processes:

  1. Monthly Reconciliation:

    • Monitor total inventory differences month-to-month (e.g., the observed difference of 13,00013,000 euros for June).

    • Minor discrepancies are generally not adjusted directly in accounting; they are observed to self-correct over subsequent periods.

  2. Consignment Stock Reconciliation:

    • Generate a separate report from the LN system for "local stock" (consignment goods).

    • Compare these LN report figures against specific accounting accounts for consignment stock.

  3. Material in Transit Reconciliation:

    • Internal Transit (Production Units to Warehouse):

      • Track material movement from Production Units (PUs) to warehouses through the system.

      • Generate accounting entries upon dispatch, during transit, and upon reception, as this process is fully integrated with accounting.

    • External Transit (External Suppliers, e.g., Asia):

      • At month-end, capture the position of goods in transit based on supplier notifications.

      • Record the value of merchandise in transit through specific accounting entries in "booking transit" accounts, linked to a "not yet invoiced" status.

      • These entries are recorded at month-end and then reversed at the beginning of the next month, with a new entry made at the end of the subsequent month; there is no continuous flow adjustment during the month.

Addressing Reconciliation Issues (if significant differences arise):

  1. Identify Trigger: Significant differences between system reports (XA/LN) and accounting records serve as an alert.

  2. Resolution Steps:

    • Open IT Ticket: If discrepancies suggest system issues (e.g., an order showing as in transit in one system but not in accounting), an IT ticket is opened to investigate the root cause, such as pending orders or cut-off date errors.

    • Temporary Accounting Adjustment: If an IT issue is not immediately identifiable or resolvable, a temporary accounting entry may be made to correct the difference.

    • Thorough Investigation: The cause of the discrepancy is thoroughly investigated during the subsequent month until it is resolved.

  3. Alert Thresholds: There is no specific numerical threshold. The process relies on the preparer's knowledge and month-on-month monitoring to assess significance and understand the nature of the difference (e.g., timing, system error) rather than just its magnitude.