How to Reconcile Your Manufacturing Month-End Close

1. How to Reconcile Your Manufacturing Month-End Close Douglas A. Volz Sharon L. Widmer October 1998

2. 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.

3. Reconciliation Agenda • General Reconciliation Principles • Receiving Valuation Accounts • Inventory Valuation Accounts • Work In Process Valuation Accounts

4. There Has to be an Easier Way !!

5. General Reconciliation Principles • Use the following formula:Prior 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

6. 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!!

7. 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

8. 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

9. 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”

10. 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

11. 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

12. 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

13. 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

14. Month-End Close Reports (Cont’d) • 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

15. 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

16. Common Problems (Cont’d) • 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)

17. 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

18. Desired Enhancements (Cont’d) • 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

19. 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.)

20. Thank You for Your Attendance and Participation Douglas A. Volz Sharon L. Widmer