Continuing our series on year end closing, comes the Inventory Audit Report. This report is designed to help you reconcile your yearly inventory transactions with the ending balance in your inventory G/L account balances. It should be part of your company's normal procedure to close a period and close out the year. The inventory audit report will give you the total inventory value for the criteria you've selected.
The Inventory Audit Report is only available if you are using a perpetual inventory system such as average, standard, and FIFO valuation methods. If you use a non-perpetual inventory system you should be running the Inventory Valuation Report which we will be covering in another knowledge base post.
Running the Inventory Audit Report
Navigate to Inventory -> Inventory Reports -> Inventory Audit Report on the SAP Business One main menu. You will be presented with your criteria selection form to run the report.
You can choose whether you want to use the system date or posting date of the inventory transactions. For year end purposes you should select system date because all inventory value calculations in SAP Business One happen according to system date. We want to match our numbers with the G/L account balance so we need to get an accurate number. You may run into an issue with backdated inventory transactions which will have to be reconciled by using the posting date. However, you only have to do that if you encounter that issue.
For year end closing select the entire year as your date range. For closing periods you can limit the date range for just that period.
The only other setting we need to run our Inventory Audit Report is to check the box for "Summarize by Accounts". This just gives us the information we need to reconcile our balances by listing just the G/L account and the transaction balance. Run the report.
Reconciling Your Inventory Accounts
You will see your G/L account there with a golden arrow to visit the chart of accounts and a black arrow which will allow you to drill down for more information.
Click on the golden arrow next to the G/L account number and check the balances. The reports value in the far right hand column should match with your G/L accounts stated balance.
What should you do if the balances do not match? Mismatched balances could be the result of a few things in SAP Business One. Take that list and start investigating the source of the problem to fix the issues before moving on to the next year.
Possible Mismatched Balance Causes
- Having multiple inventory accounts.
- An inventory account that was changed sometime during the year.
- Manual journal entries that were posted to the inventory accounts.
- Mistakes such as inventory postings from a drop ship warehouse and non-inventory items.
- Incorrectly setup inventory accounts.
Please let us know if you have any questions by leaving a comment or emailing us at email@example.com. We'd love to hear from you and good luck on your year end closing and running the inventory audit report.