1. Douglas Volz Consulting
60 Inventory Orgs? 6 Ledgers? No Worries, Reconcile Your Inventory With Ease! OAUG NorCal Training Day January 13, 2011
Douglas Volz
Douglas Volz Consulting

2. Reconciliation Agenda
Background
General Reconciliation Principles
Receiving Valuation Accounts
Inventory Valuation Accounts
Work In Process Valuation Accounts
Common Reconciliation Challenges
Custom Solutions for Multiple Organizations
Slide 2

3. Summary Background Inventory to G/L reconciliation can be difficult
This presentation includes the standard Oracle techniques
Plus additional ideas and solutions that exceed standard tools
Doug has helped Oracle clients with Cost Accounting since 1990
Doug also leads the OAUG Cost Management SIG
Doug has helped over 40 clients with inventory reconciliation challenges, from detailed diagnoses, training sessions, custom reconciliation reports to assistance with streamlining month-end close processes. His reconciliation experience started with early Oracle clients in Release 9 (1990) and continues up to present versions.
Slide 3

4. Sample Financial Structure to Reconcile
Use of Secondary and Primary Ledgers was specific to client situation with certain currency thresholds.
Slide 4

5. There Has to be an Easier Way !!
Slide 5

6. 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 perpetual report balances
If you do not balance, check for manual G/L journal entries and entries from other subledgers
Slide 6

7. Sample Reconciliation Worksheet
Slide 7

8. More Reconciliation Principles
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
Release 11i: Watch out for transaction & reporting cut-offs issues
Release 12: All Inventory and Receiving Value Reports have an “As of Date”
Slide 8

9. 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
Slide 9

10. Receiving Value Report
Slide 10

11. Receiving Account Distribution Report
Slide 11

12. How to Balance the Inventory Valuation Accounts
Use the Inventory Valuation Reports to get the month-end balances
Or, use the Period Close Reconciliation Report
You can also use the Transaction Historical Summary Report
Transaction Historical Summary Report – Standard Costing
Transaction Historical Summary Report – Average Costing
Also use the Period Close Value Summary Report
And for monthly totals use the Material Distribution Summary Report
Slide 12

13. Material Account Distribution Summary
Slide 13

14. All Inventories Value Report
Slide 14

15. Inventory Value Report
Slide 15

16. If the Inventory Accounts Do Not Balance
Check for miscellaneous inventory transactions, where the offset account is the same as the subinventory or organization valuation account
Use the Material Distribution Inquiry to find these, query for entries that hit your subinventory valuation accounts (Std) or organization valuation accounts (Avg), where the Accounting Line Type is “Account”
Account Alias Issue Example
Inventory Acct Line Type
DR Inventory Account (from the Account Alias)
Account
CR Inventory Account
Inv valuation
Slide 16

17. If the Inventory Accounts Do Not Balance
Slide 17

18. 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
Slide 18

19. Intransit Value Report
Slide 19

20. 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
Slide 20

21. WIP Value Report
Slide 21

22. WIP Account Summary Report
Slide 22

23. R12: Journal Entries Report – Cost Management
Process Category:
Inventory
Receiving
Work in Process
Manual / Third Party Merge
Slide 23

24. Journal Entries Report – Cost Management
Slide 24

25. Journal Entries Report – Cost Management
Slide 25

26. Journal Entries Report – Cost Management
Slide 26

27. Drill-Down From the General Ledger
Release 11i: The Inventory/WIP GL batch numbers are visible in the G/L, as part of the journal entry batch name
Release 11i: You can run the Material and WIP Distribution Reports by this G/L batch number and compare to the General Ledger
Release 12: You cannot see the organization code or G/L batch number on the G/L journal entry batch name unless you customize your SLA rules
Release 12: You can drill down from your G/L to the Subledger Accounting Entries to the material, receiving and WIP transactions
Release 12: You can run the Subledger Journal Entries, Account Balances or Account Analysis Reports (with setup required)
Slide 27

28. Oracle Release 10 to 11i Inventory/WIP Integration to the GL
COLUMN NAME DATA TO INSERT DESTINATION WHERE THE DATA SHOWS UP
REFERENCE GL_BATCH_ID, ORGANIZATION_CODE JE_BATCH NAME Post Journals Form
REFERENCE Insert GL_BATCH_DATE, ORGANIZATION_CODE,
ORG_GL_BATCHES.DESCRIPTION, JE_BATCH DESCRIPTION Post Journals Form
REFERENCE DO NOT POPULATE Use unknown
REFERENCE DO NOT POPULATE JE_HEADER NAME Account Analysis Report,
Account Inquiry
Note: Journal Import will append JE_CATEGORY_NAME, CURRENCY_CODE
REFERENCE Same as REFERENCE JE_HEADER DESCRIPTION Account Inquiry
REFERENCE DO NOT POPULATE JE_HEADER external_reference
REFERENCE DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_FLAG
REFERENCE DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_PERIOD_NAME
REFERENCE DO NOT POPULATE Used for JE_HEADER ACCRUAL_REV_CHANGE_SIGN_FLAG
REFERENCE Same as REFERENCE JE_LINES DESCRIPTION General Ledger Report,
Journal Entry Inquiry
REFERENCE Insert GL_Batch_ID GL_JE_LINES.REFERENCE Not Displayed
REFERENCE Insert ORGANIZATION_CODE GL_JE_LINES.REFERENCE Not Displayed
REFERENCE Insert TRANSACTION_ID GL_JE_LINES.REFERENCE Not Displayed
This is the original design from 1992 for Release 10
Slide 28

29. 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
Slide 29

30. Month-End Close Reports (Cont’d)
Inventory Value Reports
Elemental Inventory Value Reports
Intransit Value Report
Subinventory Account Value Report (disabled in Release 12)
All Inventories Value Reports
Receiving Value Report
Receiving Value by Destination Report (disabled in Release 12 – unable to view the perpetual expense balances)
WIP Value Report
Period Close Value Summary Report
Period Close Reconciliation Report ( and 12)
Slide 30

31. Common Reconciliation Challenges
Release 11i only: report cut-off issues at month-end or running multiple periods at a time
Account alias or miscellaneous inventory transactions using same accounts
Disabling a code combination during the month
Subledger miscodings
Manual G/L journal entries
Back-dated transactions from external system feeds
Miscoded purchase orders
Delivering goods to a closed work order
Slide 31

32. Common Reconciliation Challenges (Cont’d)
Sharing System Accounts:
Expense and Inventory Accrual Accounts
Receiving Valuation Accounts
Organization Level Accounts (Average, FIFO, LIFO Costing)
Subinventory Accounts (Standard Costing)
Cost Group Accounts (Project Mfg, WMS)
WIP Accounting Classes
Inventory Account Aliases
Order Types and COGS
Release 12 Subledger Accounting Rules causing you to share accounts
Release 11i: wrong initial subinventory summary balances
Initial legacy GL balances to do not match Oracle perpetual
Slide 32

33. R12 Improvements Period Close Diagnostics
Forms Drilldown
Using the same Inventory Accounting Periods form you can drilldown to associated forms to view the problem transactions
New workflow to notify of failing transactions
Period Close Pending Transactions Report
Report the transactions holding up the inventory accounting period
Only by inventory organization and only by transaction error
The period close diagnostics tools have been improved to simplify the effort of accurately closing accounting periods for costing transactions. New tools are provided to highlight unprocessed transactions, and user can click drilldowns to the details of those transactions. This helps users identify and resolve these exception transactions quicker.
There is a new diagnostic report format in BI Publisher that shows all transactions that are holding up period close.
And, users can setup alerts and notifications for real time notification of system errors.
Slide 33 33

34. Reconciliation Improvements in R12
The following reports can now be run with an As-of Date:
Inventory Value Report – By Subinventory
Inventory Value Report – By Cost Group
Elemental Inventory Value Report – By Subinventory
Elemental Inventory Value Report – By Cost Group
All Inventories Value Report
All Inventories Value Report – By Cost Group
Intransit Value Report
Receiving Value Report
Many of these reports are also available in R12 as XML reports
Slide 34

35. R12 Challenges – Inventory Reconciliation
May have more inventory reconciliation issues in R12
Issues Common to Release 12 and 11i
The differences between the perpetual and accounted-for inventory balances are trapped in a table the users don’t see
Limited use for the Period Close Reconciliation Report
Most users and analysts don’t know about it
Limited to a single warehouse
Shows zero quantity items – which is not efficient
Need a Multi-Org Perpetual vs. Accounted-For Report
Slide 35

36. R12 Challenges – Inventory Reconciliation
Sample Period Close Variances Report
From the CST_PERIOD_CLOSE_SUMMARY table
You can also use this information to get your month-end perpetual quantities and values for intransit and subinventories
Slide 36

37. New Reconciliation Challenges in R12
Subledger Accounting and Inventory Reconciliation
Which accounts represent inventory and WIP valuation?
Harder to reconcile manually with no valuation accounts on the Inventory Value or Receiving Value Reports
Receiving Value by Destination Account Report is disabled
The Inventory Value Report, subinventory sort, summary option has no valuation accounts
The Receiving Value by Destination Account Report has been disabled
Release 12 dropped the valuation accounts on most inventory reports
Slide 37

38. R12 Material and WIP Distribution Inquiries and Reports
Release 12 mat’l and WIP distribution inquiries & reports do not reflect the SLA results
SLA Journal Reports do not show operational information
Release 12 records the material accounting and WIP accounting entries by cost element – rendering these inquiries and reports more difficult to use, especially for Standard Costing.
Release 12 forces Standard Costing to record WIP & Material entries by Cost Element / you can summarize in SLA but you don’t have the same detail reporting in SLA
Slide 38

39. Basic Table Structure for SLA
Module Specific Transaction Accounting Tables
Enter Transaction(s)
One Common Accounting Subledger Table
Accounting Processor
SLA Accounting Tables
G/L Tables
Transaction Accounting Tables
GL_LEDGERS
XLA_EVENTS
Create
Accounting
GL_JE_BATCHES
Receiving
Material WIP
XLA_AE_HEADERS
GL_ INTERFACE
GL_JE_HEADERS
XLA_AE_LINES
GL_JE_LINES
XLA_DISTRIBUTION_LINKS
Slide 39

40. Custom Solutions for Multiple Organizations
Common Custom Reports and Desired Enhancements
Multi-Org Material Account Summary Report
Multi-Org Receiving Account Summary Report
Multi-Org WIP Account Summary Report
Multi-Org All Inventories Value Report
Multi-Org Inventory Value Report
Multi-Org Receiving Value Report
Multi-Org Expense Value Report
Multi-Org WIP Value Report
Multi-Org G/L to Inventory Reconciliation Report
Slide 40

41. Desired Enhancements (Cont’d)
Eliminate the two layers of accounting entries in R12
Put the Inventory and Receiving Valuation Accounts back on the valuation reports
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 (especially the Receiving Interface)
Slide 41

42. Desired Enhancement: G/L to Inventory Reconciliation Script
Just think how much time this would save …
Slide 42

43. Sample G/L to Inventory Reconciliation Script
Selects and compares:
Selects the cumulative G/L balances by journal source
Selects the cumulative Inventory (stores) and Intransit perpetual balances from the month-end snapshot
Selects the cumulative WIP balances
Compares the three above balances and reports differences
Runs in under 2 minutes for 6 ledgers with 60 inventory orgs
R11i, change GL_LEDGERS to GL_SETS_OF_BOOKS
Slide 43

44. Sample Reconciliation Script (Cont’d)
Automatically Compares:
G/L to Inventory Perpetual
G/L to Intransit Perpetual
G/L to WIP Period-End Balances
Caveats:
Tested for Standard Costing (should work for Avg, FIFO, LIFO)
Assumes using product line or product group segment from your item master COGS account
Does not consider Cost Groups
Assumes using one valuation account per subinventory or org
Your Release 12 Subledger Accounting Rules may be different
Slide 44

45. G/L to Inventory Reconciliation Data Flow
LEGEND
Costing & WIP tables
General Ledger tables
Period End Cost Snapshot Tables
CST_PERIOD_CLOSE_SUMMARY
WIP_PERIOD_BALANCES
Compare Balances by Full Account
Report Output
General Ledger Tables
GL_LEDGERS (R11i: GL_SETS_OF_BOOKS)
GL_BALANCES
GL_JE_HEADERS
GL_JE_LINES
GL_CODE_COMBINATIONS
Slide 45

46. G/L to Inventory Reconciliation Lookup
Uses a lookup type to identify the inventory reconciliation accounts
Slide 46

47. G/L to Inventory Reconciliation Report
These concepts work for AVG and STD Costing, for both Release 11i and 12
Slide 47

48. Summary Release 12 solves many of the report cut-off issues
Still have multi-org reporting issues with account distribution and valuation reports
Release 12 Subledger Accounting can complicate reconciliation
Investments in custom reporting can save significant amounts of time at month-end
Slide 48

49. Send Email Address to Get the Following:
Mention which release, costing method, and if using separate accounts by cost element
Sample reconciliation excel spreadsheet
Comparison Script between the G/L and Inventory Perpetual Values
Informal workshops can be arranged
Slide 49

50. Acknowledgements Oracle Cost Development
Partners in crime at my many clients

51. Douglas Volz (doug@volzconsulting.com)
Professional Background
Doug Volz is a Senior Architect and Advisor for Oracle Application projects, with a particular interest in Cost and Project Management. He has 30 years accumulated experience, including 5 years in Oracle Development (co-designing Oracle Cost Management) and 12 years in industry in Cost and Accounting Management positions. His Manufacturing and Cost systems experience covers project management, software design/development, delivery and consulting services, for both Oracle Corporation, and multiple international consulting firms. Prior to his systems career, Mr. Volz also held numerous management accounting positions for telecommunications, defense, and electronics companies.
In his consulting roles Doug has served over 100 clients. Many of these were multi-org, multi-currency with global footprints. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, P.R.O.C., Norway, Japan, Italy, Switzerland and Germany.
Doug leads the OAUG Cost Management Special Interest Group. He also advises and participates on the Oracle Customer Advisory Board for Fusion Costing.
Core Expertise
Experience
Sample of clients served:
Beckman Coulter (US)
Matsushita (UK, Mexico)
NTL (UK, now Virgin Media)
Logitech (US, Taiwan, P.R.C.)
Celgene Corporation (US, Switzerland)
TCI International (US)
Onninen AS (Norway)
Multi-organization, Multi-currency ERP Implementations
Project Management and Senior Project Advisor
Core manufacturing processes
Cost Management
Inventory
Bills of Material
WIP
Systems Integration and Data Conversions
Slide 51 51

52. Thank You for Your Attendance and Participation52