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Inventory Year-End Closing Checklist

Use the procedure described in this section to close the year for Inventory Control and prepare your inve... thumbnail 1 summary

Use the procedure described in this section to close the year for Inventory Control and prepare your inventory records for the new fiscal year. Closing a year transfers all summarized current-year quantity, cost and sales amounts to transaction history for the items for which you've been keeping summarized sales history. This procedure also updates each item's beginning quantity to the quantity on hand at each site.

1. Post all transactions for the year.
2. Reconcile Inventory quantities.
3. Complete a physical inventory count and post any adjustments.
4. Print additional reports.
5. Make a backup.
6. Close the year.
7. Close the fiscal periods for the Inventory series (optional).
8. Make a final backup.


Step 1. Post all transactions for the year
Be sure that all Invoicing, Sales Order Processing and Inventory transactions for the current year have been entered and posted before you close the year. This is important to ensure that historical information is accurate for the year you are closing and year-to-date amounts are accurately stated for the new year. If you wish to enter future-period transactions before closing the year, create a new batch with new transactions, but do not post it until after the year has been closed.

Step 2. Reconcile Inventory quantities
Reconcile quantities for all inventory items using the Reconcile Inventory Quantities window to ensure that your Inventory Control data has not become damaged over the course of the year. If any discrepancies are found during the reconcile process, the quantities will be adjusted. If adjustments are made, they will be reflected on the Reconcile Report, along with any serial numbers and lot numbers that were added for the adjusted items. If you want to edit these serial and lot numbers,
you can use the Item Transaction Entry window to do so by making adjustment transactions.

Step 3. Complete a physical inventory count and post any adjustments
Print a Physical Inventory Checklist using the Inventory Activity Reports window and perform a physical count of your inventory items to verify that quantity-on-hand amounts are accurate for all items. If discrepancies exist, enter the necessary adjustments in the Item Transaction Entry window and post them.

Step 4. Print additional reports
Print any additional reports you'll need for planning or your permanent records, including the Stock Status Report, Purchase Receipts Report, Turnover Report, Transaction History Report, Serial Number List, and Lot Number List. Use selections from the Inventory Reports palette to print these reports. If you plan to remove sold purchase receipts during the year-end closing process, we recommend that you print the Purchase Receipts Report to review the receipts that will be removed.

Step 5. Make a backup
Make a backup of all company data. This is important to ensure that you will be able to recover quickly should a power fluctuation or other problem occur during the year-end closing procedure.

Step 6. Close the year.
Closing a year accomplishes the following tasks:
·  Transfers all summarized current-year quantity, cost and sales amounts to transaction history for the items for which you've been keeping summarized sales history.
·  Updates the item's beginning quantity to the quantity on hand at each site. Certain reports, such as the Turnover Report, use the beginning quantity field for report calculations.
·  Zeros the quantity sold field in Item Quantities Maintenance for each site.
·  Remove purchase receipts for items that have been completely sold.
·  Remove any discontinued items from the item records that have been completely sold.
·  Remove any lot attributes from the records of lot-numbered items if they have been completely sold.
·  Updates the standard cost of each item to the current cost if you are using either the FIFO periodic or LIFO periodic valuation method.
Use the Inventory Year-End Closing window to close the year. Use the following descriptions to learn more about each option:
Remove: Discontinued Items - If you mark the Discontinued Items option, all discontinued items that have a zero balance will be removed during the year-end closing process. (Items can be designated as discontinued using the Item Maintenance window.) Discontinued Items that have a Quantity On Hand of zero (except for kit components) and do not have any unposted transactions will be completely removed from the Inventory module. The Sales Order Processing, Invoicing, or Purchase Order Processing reports and inquiries will still be able to pull information regarding these discontinued items,
however you will not be able to do a lookup on the Item Number since it has been removed from the Item Master. If you would like to print a report or inquire on the discontinued Item, you will need to include the Item within the Item Number Range.
Remove: Sold Receipts - If you mark Sold Receipts, all sold receipts whose quantity received and quantity sold amounts are equal will be removed. This is an optional step and may not be a procedure that is done every year-end. These values may be helpful when items are returned through Invoicing so you may not want to remove the receipts from the file.
Remove: Sold Lot Attributes - If you mark Sold Lot Attributes, values for completely sold lot numbers will be removed. (For example, you can remove the value red for the lot attribute color if you've sold all lot-numbered items that have been assigned the value red.)
Update: Item's Standard Cost - If you mark item's Standard Cost, the standard cost for any items that have been assigned the FIFO periodic or LIFO periodic valuation method will be adjusted automatically to reflect each item's current cost or the amount you most recently paid for the item.
When you've selected all the options you want, choose OK to begin the year-end closing process. While the year is being closed, you won't be able to post, reconcile quantities, change valuation methods or change decimal places for items. We recommend that you shrink your Inventory Control data files to make additional space available on your hard disk. Use the Shrink window to shrink data files; refer to the online documentation for that window if you would like more information about this procedure.

Step 7. Close the fiscal periods for the Inventory series (optional)
You can use the Fiscal Periods Setup window (Setup-Company-Fiscal Periods) to close any fiscal periods that are still open for the year. This keeps transactions from accidentally being posted to the wrong period or year. Be sure you have posted all transactions for the period and year for all modules before closing fiscal periods. If you later need to post transactions to a fiscal period you have already closed, you'll need to return to the Fiscal Periods Setup window to reopen the period before you can post the transaction.

Step 8. Make a final backup
Make a final backup of your company's data files and keep it in safe, permanent storage. This gives you a permanent record of the company's financial position at the time you closed the year, and can be restored later if necessary.

INVENTORY YEAR-END CLOSING TIPS
The year-end close must be done before any transactions for the new year have been posted. You have the option of marking Discontinued Items, Sold Receipts or Sold Lot Attributes. If marked, all items, sold receipts or sold lot attributes that have a zero balance will be remove during the year-end closing process. If you mark Update Item's Standard Cost, the standard cost for any items that have been assigned the FIFO periodic or LIFO periodic valuation method will be adjusted automatically to
reflect each item's current cost, which is the amount you most recently paid for the item. There is no Year End Closing report for Inventory.

Inventory Year-End Questions and Answers
Average cost update
Q: How is the average cost of an item updated throughout the year and during the year-end closing process when using the
average perpetual (weighted moving average) method of costing?
A: If you are using the average perpetual costing method, all receipts for each item will be averaged to determine the
average cost. Even if quantities are sold, the average does not change until another purchase receipt for the item is posted
to the Inventory Purchase Receipts File. The year-end closing process does not change the average cost, but it will remove
the purchase receipts that have been completely sold. The next time a receipt is entered, the average cost will be revalued
with the receipts that remain in the Inventory Purchase Receipts File. Standard cost update
Q: Can the Inventory Year-End Closing window be used throughout the year to update the standard cost of items if using the
periodic valuation method?
A: This is not recommended because the beginning quantity field is updated during the year-end closing process. This would
make that field incorrect on reports such as the Turnover Report.

1 comment

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