Inventory Analysis and CDD 2011 National Conference

1. Inventory Analysis and CDD2011 National Conference

2. Agenda • Review 4 sided vs 2 sided G/L entries • Things that will cause large month end adjustments • Eagvantage margin analysis • Inventory Receiving • Month end adjustments • Icost file • Inventory CDD

3. 2-Sided Entries Inventory When you bring an item in through an Inventory Receiver the following entry is made: Debit 504010 $500 Soybean Meal Purchases Credit 200200 $500 Inventory Received not Invoiced

4. 2-Sided Entries Sales When you Sell an item the following entry is made: Debit 404010 $500 Soybean Meal Sales Credit 101010 $500 Accounts Receivable

5. 4-Sided Entries Inventory When you bring an item in through an Inventory Receiver the following entry is made: Debit 104010 $500 Soybean Meal Inventory Credit 200200 $500 Inventory Received not Invoiced

6. 4-Sided Entries Counter Invoicing When you invoice the item in Counter Invoicing the following entry is made: Debit 101010 $600 Accounts Receivable Credit 404010 $600 Soybean Meal Sales Debit 504010 $500 Soybean Meal Cost of Sales Credit 104010 $500 Soybean Meal Inventory

7. Advantages of 2-Sided Entries • Incorrect cost of sales are fixed at the end of the month adjustments. • Margin adjustments on products that are not inventoried.

8. Disadvantages of 2-Sided Entries • You can’t see what cost of sales your sales are getting. • You generally don’t realize you have erroneous cost of sales until it is to late to correct them easily. • Need to make month end adjustments before printing financials. • Generally based on margin % which leads to large journal entries when adjusting to actual inventory. • When you run sales analysis you may have erroneous cost of sales.

9. Advantages of 4-Sided Entries • Inventory GL accounts (Assets) are always up to date • Cost of Sales and Purchase accounts are always up to date • Can run financial statements anytime during the month and have relatively complete information • Financial statements closely match sales reports. • Reduces the need to create GL inventory adjustments at the end of each month • Still probably want to do them to account for times when the product is sold prior to the purchase. If the cost changes significantly.

10. Disadvantages of 4-Sided Entries • You really need to be using inventory or the cost of sales will be erroneous. • Although the new margin function can eliminate this. • If you turn this on without properly preparing, your financials will be erroneous.

11. Causes of big adjustments • Dropped receiving records • Item transfer # issues • Blends not set up right • Posting accounts payable invoices directly to GL accounts • Date of receiving/transfers do not match GL month

12. Eagvantage Online reporting • Management tools • Sales information • Sales by department/fine line code • Can drill down for departments/fine line codes margins out of line • Include unmerged to get a jump start on errors before they are merged

13. Receiving • Most errors caught here before being merged • Retail price established here • Margin not correct must be fixed • Receivers must be merged before sale • Dropped duplicate receivers • Purchase factors

14. Monthly Journal entries • General ledger - journal processing – Enter Inventory adjustments (set up needed) • Inventory – Inventory Reports – Summary Inventory Report in GL Sequence

15. Summary Inventory Report by GL

16. Journal entries for Inventory Adjustments

17. Icost file • Quantity should balance to actual count • Base on Merged as the U8ICOST on purchases is updated in the merge • If the cost is wrong manually fix it as backing out and putting back in will not necessarily fix the u8icost file. • V7 puts costs in U8icost for last cost valuation. • Negative quantities in file causes incorrect costing

18. Summary • Earlier the problem is identified the less the impact is on the margin • Once error identified can take months to clear up • Takes a long time to fine tune the reports to run with very few errors • Must be willing to be ‘close’ • Team commitment from item setup, to receiving, to sales

19. THANK YOU Please fill out yourevaluation forms