Inventory valuation question

[Chris Kelleher]

Pls present to the user group:

We have a practice of invoicing our customers for inventory that we manufactured that has not moved after 120 days. In most cases, the inventory does not move from its location in the warehouse, we simply invoice the customer.

What is the best way to exclude the value of the ware that has been invoiced from our inventory value reports? Note: In some cases, we may have 50,000 bottles that have been invoiced and 50,000 bottles that have not, therefore, zeroing out the costs is not an option.

We need to continue to maintain visibility in MRP but exclude from inventory cost reports.

Jack
:::::
o.k. Peggers, This is 8.6e progress 8.3a

As a little foot note, The customers that usually order the ware either give us a sales order with a due date that is much earlier than they actually plan to take it. The other way is the customer gives us a paper forecast as to what product they want and how and when they want it, but then they don't pick it up for three to five months. After 120 days, our accounting dept issues a misc. invoice for the customer to bill them for the ware whether or not they actually ask for it's delivery. The whole problem is, is if we put the inventory to a non nettable location and the sales order is not yet received for the ware, MRP won't see the inventory, but when the S.O. comes in, then MRP will atempt to plan for it, because it sees the new demand. the whole bottom line is that shipping and manufacturing want to be able to see it, but Accounting does not.
dave.

 

[Chris Kelleher]

Hi, David.

You could try using another site that is zero costed. This would:

Give you nettable inventory
Remove it from your inventory section of your balance sheet by being zero
costed
Make Accounting REALLY nervous

Sounds like a good choice!! ;-)

Seriously, I don't know the GAAP impact, but this you could do.

Another possibility is creating a special location, under your main site,
for this inventory. Then change all your financial inventory reports,
balance sheet(s), accounting reports, etc. to exclude this location. I
actually have a couple of customers that have gone this route.

Hope this is helpful.

 

[Chris Kelleher]

David,

I've got a couple of questions for you:

> We have a practice of invoicing our customers for inventory that we manufactured that has not moved after 120 days. In most cases, the inventory does not move from its location in the warehouse, we simply invoice the customer.

How do you process the invoice?

> What is the best way to exclude the value of the ware that has been invoiced from our inventory value reports? Note: In some cases, we may have 50,000 bottles that have been invoiced and 50,000 bottles that have not, therefore, zeroing out the costs is not an option.

Why do you still have the 50,000 you invoiced in your inventory? They should be taken out of inventory even if you use Pending Invoice Register.

> We need to continue to maintain visibility in MRP but exclude from inventory cost reports.
>
> Jack
> :::::
> o.k. Peggers, This is 8.6e progress 8.3a
>
> As a little foot note, The customers that usually order the ware either give us a sales order with a due date that is much earlier than they actually plan to take it. The other way is the customer gives us a paper forecast as to what product they want and how and when they want it, but then they don't pick it up for three to five months. After 120 days, our accounting dept issues a misc. invoice for the customer to bill them for the ware whether or not they actually ask for it's delivery.

So this invoice is not tied to your Inventory. How do you balance/control your Inventory Balances / COGS to reflect your invoicing?

> The whole problem is, is if we put the inventory to a non nettable location and the sales order is not yet received for the ware, MRP won't see the inventory, but when the S.O. comes in, then MRP will atempt to plan for it, because it sees the new demand. the whole bottom line is that shipping and manufacturing want to be able to see it, but Accounting does not.

How do you process your shipment when the customer finally decides to receive their inventory?

The inventory is no longer owned by your company even though it's physically there, hence it shouldn't appear anywhere in your books. Move it to a location with restricted inventory transactions so it isn't included in SO's or any other "illegal" transaction. Since you want to keep it in your site, I'd ask the folks from Accounting to create manual GL transactions that would relieve your inventory account and charge the COGS account. Then you'd have to Debit the cost of the parts to a "Third Party Account" and credit a Liability account. When you ship the parts you would debit the Liability account and credit the "Third Party Account". If you move the inventory for any reason you'd have to make sure that you make all the manual GL entries right so that they affect the right accounts

If all this makes sense to you email me back and we can look at it closer.

HTH,

Carlos


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Carlos Colmenares http://www.protech.com
Senior Programmer ccolmenares@protech.com
Protech Systems Inc. (609) 714 0700 - Ext. 50
PEG Member 1999061404
I'm the only one to praise/blame for whatever I do/write/say
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"Quick to judge, quick to anger - slow to understand
Ignorance & prejudice & fear walk hand in hand" RUSH - Witch Hunt.