Stock Valuation - Is your GL Understated?

Craig_Needham

Greetings to all.

We are experiencing a problem with Stock Valuation Reports compared to what the General Ledger states the value of the stock should be. I really hope someone can tell me I am just being silly, because if I am not, we have a serious problem.

Navision Financials Updates the General Ledger with the invoiced amount, once the invoice has been received. This means that if we receive 1000 units of a particular stock item that was ordered, that 1000 units will be entered into the item ledger entries to indicate that the additional stock is available. The Value of these 1000 units will not be posted to the correct GL Account until the invoice for the stock has been posted.

I have a problem with this, because a stock valuation report will indicate the value of the additional 1000 units, but the GL will be understated until the stock is invoiced.

This also means that there is no way to look at your General ledger to see what exactly the value of your stock is.

Furthermore, if there is a price variance between the receipted value and the invoice value of the goods, that variance is not recorded anywhere. The invoiced value is posted at the new (Invoice Value). This is fine, but there is no record of the price variance, or what the original receipt value was. We, and unfortunately our clients, find this unacceptable. We require an accurate representation of the financial situation by looking at the GL at any point in time.

The one solution for this possible problem would be to make extensive modifications to the posting code units. Posting to the GL will have to be made to a suspense account upon receipting of the goods. As the goods are invoiced the suspense account will have to be cleared and the variance (if any) will have to be posted to a Price Variance Account. Partial Invoicing, Stolen Stock, and other scenarios will have to be catered for.

My question is basically this. How does every body else deal with this problem? Has these modifications been made by anyone? Is there a magic setup checkbox that I can tick to make all my problems disappear?

I would greatly appreciate anyone's opinion on this matter.

Kind Regards

Craig Needham
Datrix Solutions

P.S. Below is a requirement from our client. How does everyone deal with this problem.

We require the system to work as follows:
¨ Place an order
¨ Receive the goods - The stock general ledger account is debited and the GR/IR general ledger account is credited, the average price on the item card is updated at this point.
¨ Receive the invoice for the goods - The GR/IR general ledger account is debited and the Vendor is credited, the average price on the item card is already updated and therefore does not need updating.
¨ Everything concerning stock should be at the receipting stage and not the invoicing stage!

BennyGiebens

Everythin In NF is fine if you do your reception and invoicing or your delivery and invoicing at the same time. Unfortunatly in the real world this isn't so.

On the other hand it's not a good thing to get statistics about stock value from your general ledger.

You can do this with getting a list with the average price of your items on stock, but this one will never be completly correct as you mostly never know at withc price the goods will be invoiced (at least we don't know it everytime !!).

Sorry, but i can't give you an solution of setting a switch somewhere so the problem goes away.

PS. I have another problem also. What do you do whit creditnote for defective items ??? You send the item back but you can't make the creditnote before you get it, so in the mean time you stock isn't correct !!

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Rgds
Benny Giebens

Lars_Westman

Some thoughts about Craigs notes:

In the stock valuation report You can see the value of Youe "invoiced" stock and Your physical stock. This is fine for our customers. They have often had problems with this in their old systems since these systems often does the valuation based only on the physical stock regardless of the recieved but not yet invoiced gods.

When closing their fiscal year some of our customers makes a manual posting of the difference between the posted value in the GL and the value of the physical stock. This is however only a transaction between balance accounts and does not influence the margin.

If You want to You can find out the variance by looking at the unit cost on the item ledger transaction of the recieved goods and the amount posted to GL. The unit cost on the recieved goods is not changed by the adjustment batch.

OK. Everything isn't perfect, but we never encounter it as a big problem. Most of our customers appriciate the inventory valuation principles in Navision once they get used to it.

//Lars Westman

Craig_Needham

Thanx for the reply.

Unfortunatly in South Africa its common practise to compare inventory value with the value in the Ledger so it looks like I have quite a bit of work to do.

Craig.