Easing Reconciling Oracle Inventory and General Ledger with Simplified Procedures

1. Easing reconciling Oracle Inventory & General
Ledger with simplified procedures
GIRISH K PALEKAR
PRINCIPAL SOLUTION ARCHITECT
KPIT CUMMINS INFOSYSTEMS LIMITED
girish.palekar@kpitcummins.com
Session ID: 8984
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3. • Girish Palekar is Principal Solution Architect
at KPIT Cummins Infosystems, India and
currently leads a team of Oracle Apps
Subject Matter Experts (SME).
• Girish is a fellow Chartered Accountant
(CPA equivalent) and he is into Oracle Apps
for last 10 years.
• Finance &SCM are his area of special
interests and he has been instrumental in
designing a number of Oracle Apps utilities
and RICE components in the Finance and
SCM area.
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4. Agenda
What is Inventory Reconciliation?
How to perform Inventory Reconciliation?
How to perform Receiving Inventory Reconciliation?
How to perform Intransit Inventory Reconciliation?
Inventory Reconciliation in Multi inv org scenario
What causes reconciliation gaps?
How to find out reconciliation differences?
Important reports useful in Inventory Reconciliation
Tips and tricks of Inventory Reconciliation
Q&A
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5. What is Inventory Reconciliation?
Material Work In Progress
Transactions Transactions
Outside
Processing
Material
Overheads
Overheads
Inventory
Material Value
Resources
Cost Material Transaction Move Transaction
Manager Manager Manager
General Ledger
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6. What is Inventory Reconciliation?
When Material or WIP transaction is
Inventory - Cost processed the on-hand quantity &
elements and average cost is updated
Material On-hand quantity multiplied by the
Distributions
item cost = Inventory value
WIP - Cost elements MATERIAL
and WIP
Distributions MATERIAL OVERHEAD
OUTSIDE PROCESSING
PRODUCTION OVERHEAD
Accounted in General Ledger RESOURCE
General
Ledger Inventory INV-GL
Account Value Reco
Balance
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7. Transactions affecting Material Valuation
Receiving Deliver Receiving transactions
occur in the PO module
Material transactions
Material WIP occur in the INV module
Mfg Transactions occur
Supplier Return to in the WIP module
Intransit
Shipment Vendor
Material
Supplier Shipments Back-Flush
Intransit Receipts Item Cost update Transaction
Receipt from Production Customer Returns
Misc. Issue/Receipt Issue to Production
Inter-Org Transfers Inventory Adjustments
Subinventory Transfers Return to Vendor
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8. How to perform Inventory Reconciliation?
Complete all inventory transactions
Check interfaces for errors
Close all pending shipments
Run Create Accounting program
Open Next Inventory Period
Close current inventory period
Run related reports
Period Close Reconciliation Report
Inventory Value Report
Material Account Distribution Detail Report
WIP Account Distribution Report
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9. How to perform Inventory Reconciliation?
• Running the Period Close Reconciliation report for summarizing
inventory transaction records
• It displays differences between accounted value (SLA) and inventory
value (INV)
• This report creates a baseline for inventory calculation for the next
period
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10. How to perform Inventory Reconciliation?
1
In Material Distribution Form sum
of all the lines with “Inv
Valuation” as the parameter for a
given period = value as per
‘Inventory Value Report’ for that
period?
2
Current period’s inventory value
report - last period’s inventory
value report= “Inv Valuation”
material distributions
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11. How to perform Receiving Inventory Reconciliation?
RECEIVE RETURN
RETURN TO
PO RECEIPTS
VENDOR
RECEIPT CORRECTION
RECEIVING
DELIVER RETURN
INVENTORY
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12. How to perform Receiving Inventory Reconciliation?
• Run Receiving Valuation Report to get month-end balance
Shows item quantity, valuation and detailed receipt information
TIP: Use the Detail report option, the reportwill displays details of the quantity
in Receiving Inspection for each receiving shipment.
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13. How to perform Receiving Inventory Reconciliation?
• Run Receiving Account Distribution Report to view the accounting
distributions for your receiving transactions for the period
This report supports the distributions created for
TIP:
Tally the distributions in
Purchase Order Receipts || Purchase Order Receipt
this report with the
Adjustments || Purchase Order Returns to Supplier ||
Deliver to Expense Destinations || Return to Receiving Account Analysis report
from Expense Destinations etc. (GL)
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14. How to perform Receiving Inventory Reconciliation?
Material Account Distribution Report Summary
Detail
If you detect unusual
accounts or amounts, use
the Detail report
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15. How to perform Intransit Inventory Reconciliation?
• Run the Intransit Value Report
* FOB terms decides ownership *
TIP: Set option “Only Display Inventory
You Own” to Yes
Tally the Distributions in Material
Distribution Report for
Transaction Type ‘Intransit
Receipt/Shipment’ with the
Account Analysis report (GL)
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16. How to perform WIP Reconciliation?
• Run the WIP Value Report to get the
details for the work in process
inventory for a particular accounting
period.
TIP: You must close all open periods
before the one you are running this report
for.
Tally the Distributions in WIP
Distribution Report with the
Account Analysis report (GL)
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17. Inventory accounting
• Run ‘Journal Entries Report - Cost
Management’ to summarize the
accounting entries in SLA by
Organization and accounting class
(Inventory Valuation, Receiving
Inspection, WIP Valuation, etc.) .
Note: Compare the summarized account balance at the organization level with the reports listed below
Report Name Use
Material Account Distributions (Detail and View the accounts charged for inventory transactions
Summary)
Receiving Account Distributions View accounting distributions for receiving transactions
Intransit Value Report View intransit inventory transactions
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18. Inventory accounting
Receiving Transactions Inventory Transactions
DR. CR. DR. CR.
Material Received at Material delivered to Material delivered to Material returned to
Gate Stores Stores Receiving
Material Received Material Returned to Material received Material released to
from Stores Vendor from Shop-Floor Shop-Floor
Receipt Corrections Receipt Corrections RMA Receipts Material shipped to
Customer
Miscellaneous Miscellaneous Issue
Receipt
Sub INV /Inter-Org Sub INV /Inter-Org
Transfer Receipt Transfer Issue
INV Adjustments INV Adjustments
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19. Inventory Reconciliation in multi-inventory organization scenario?
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20. Inventory Reconciliation in multi inventory organization scenario?
Business Natural Account Hierarchy
Group XYZ 1200 Inventory Roll-up
1300 Material Value Parent
1301/2/3…50 Material Account Child
Ledger A 1351/2/3…99 Intransit Inventory Account Child
1501/2/3…50 Receiving Inventory Account Child
Operating 1400 WIP Value Parent
Unit 1 2 1401/2/3…50 Outside Processing Account Child
1451/2/3…99 Overhead Account Child
1601/2/3…50 Resource Account Child
Inventory
Organizations M1 D1
Material Value 1300
Material Valuation Account M1 01…1301…
M2 + Material Valuation Account M2 02…1302…
+ Material Valuation Account D1 03…1303…
Inventory Organization M1 + Receiving Inventory Account M1 01…1501…
Material Valuation Account 01.000.1301.00.000 + Receiving Inventory Account M2 02…1502…
Receiving Inventory Account 01.000.1501.00.000 + Receiving Inventory Account D1 03…1503…
Intransit Inventory Account 01.000.1351.00.000 + Intransit Inventory Account M1 01…1351…
Inventory Organization M2 + Intransit Inventory Account M2 02…1352…
Material Valuation Account 02.000.1302.00.000 + Intransit Inventory Account D1 03…1353…
Receiving Inventory Account 02.000.1502.00.000
Intransit Inventory Account 02.000.1352.00.000
Inventory Organization D1
Material Valuation Account 03.000.1303.00.000 Inventory Value 1200
Receiving Inventory Account 03.000.1503.00.000 Material Value 1300
Intransit Inventory Account 03.000.1353.00.000 + WIP Value 1400
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21. What causes reconciliation gaps?
General
Ledger
Account
Balance
Material
Inventory
Value
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22. What causes reconciliation gaps?
• Receiving Inventory account same as INV Valuation
SETUPS • Material account is used for non-INV setup
• Setup change during the month
• Entering valuation accounts in Misc Transactions
TRANSACTIONS • Using material A/c for offsetting Avg. Cost update
• Manual Journal entries in GL
• Incorrect reports due to Data corruption
REPORTS • Back-dated transactions
• Report cut-off issues at month/period end
• Interface transactions not cleared in time
RECO PROCESS • Uncosted/Un-accounted inventory transactions
• In-Correct INV-GL Reconciliation process
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23. How to find out reconciliation differences?
General
Material
Ledger
Inventory
Account
Value
Balance
1 2 3 4 5
Identify the Separate out Within the Run relevant Compare the
correct balances for organization Distribution Distribution
difference by each segregate reports for reports with
running the inventory differences by each of the the GL reports
Period Close organization transactional transactional
reconciliation areas areas
report. (Receiving,
Material,
Intransit, etc.)
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24. Important reports useful in Inventory Reconciliation
Various reports available in Oracle Inventory and Oracle General
Ledger :
Period Close Reconciliation Report
Period Close Value Summary Report
Material Account Distribution Summary Report
Inventory Value Report
Material Account Distribution Detail Report
WIP Account Distribution Report
Account Analysis - (180 Char)
Journals - (180 Char)
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25. Tips and tricks of Inventory Reconciliation
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26. Tips and tricks of Inventory Reconciliation – Set Ups
In GL carefully design Parent-Child relationship for INV accts
Ensure only “Asset” sub inventories are considered for grouping in GL
Enable Reconciliation flag while defining Segment values
Define Cross-validation rules to prevent unwanted combinations
Define Security rules to prevent use of wrong combinations
All Cost elements to have different GL valuation accts
Ensure “Transfer to GL” is set to “Yes” under Costing Information
Subinventory level accounts to be different from Org level accts
Different Receiving account for each INV ORG
Do not check “Allow Negative Balances” unless highly necessary
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27. Tips and tricks of Inventory Reconciliation - Transactions
Ideally only one inventory period to be kept open so that no back-
dated transactions are performed
Do not use Valuation accts while processing Miscellaneous
transactions
Use single acct for all Cost Update transactions for that INV ORG
Prevent use of valuation accts while processing Physical Inventory and
Cycle Count adjustments
Do not use Material Valuation accts while processing non-inventory
transactions such as Manual JV, AP/AR/FA Transactions, etc.
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28. Tips and tricks of Inventory Reconciliation - Reports
Maintain a list of all reports required for Reconciliation so that critical
reports are not missed out
Schedule all the transactional reports you require for INV
Reconciliation
Run reports after all transactions are costed and not before
Cut-off date for reports must be the period end date
Incase of high transaction volumes run ‘Create Accounting – Cost
Management’ program on a daily basis
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29. Tips and tricks of Inventory Reconciliation - Reco Process
Make use of drilldown from GL to view Inventory/WIP transactions
Always reconcile on period end date and not in between periods
Proceed to close the INV periods only when the reconciliation tallies
Incase of differences reconcile individual ORGS/SUB INV separately
Create a log of Reconciliation findings for future references
Ensure there are no INV transactions…
created but not interfaced to GL
created and interfaced to GL but not imported for posting
un-posted in GL
Always refer Metalink Notes for smooth reconciliations
Costing Reports and Reconciliation [ID 291005.1]
11i/R12 - Resolving Period Close Pending Transaction [ID 242927.1]
Resolving Period Close Pending Transaction R12 [ID 1069492.1]”
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30. Thanks For Attending The Session !!!
Please write to Girish K Palekar for any
queries or questions that you may have
Email : girish.palekar@kpitcummins.com
Phone :
Desk Phone: +91 20 6652 5127
Cell Phone: +91 9850572160
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