Understanding inventory reports

As in Purchasing and Order Entry, Inventory Control uses transaction definitions to manage workflows. This provides you with the flexibility to customize your transaction workflows and decide when quantities and costs are updated. You can also identify which specific GL accounts transactions update. However, this flexibility can sometimes lead to unexpected reporting results.

Best practices

Sage Intacct recommends that you follow these Inventory Control setup and workflow management suggestions:

  • Use transaction workflows that update both quantity and value. These are usually the most trouble-free workflows.

  • Use specific Inventory transactions to manage items within a warehouse and to make specialized costing changes, such as:

    • Warehouse transfers: To move items between warehouses, track currency conversions, and match the transfer-out and transfer-in costs. For example, as the OUT warehouse cost changes, the IN warehouse costs change.

    • Replenishment: To order items when on-hand stock is low.

    • Landed Costs: To manage charges to purchases such as freight costs and installation fees.

    • Adjustments: To increase the cost of a purchase or sale without changing the quantities, or decrease stock on hand due to spoilage or breakage.

Using an inventory adjustment as a substitute for a purchase or sale could lead to unexpected consequences. For example, an adjustment value increase will increase the location value but not the quantity, which can throw off costing calculations. Additionally, adjusting warehouse quantities to move items between warehouses can cause costs to drift out of balance when the OUT warehouse cost is different from the IN warehouse cost.

Common report valuation questions

Why does my Valuation report differ from the Physical Inventory or Item Activity report?

The Valuation report provides insight into both quantity (shipped and received) and value (invoiced) for each item in your inventory. The Physical Inventory and Item Activity reports focus more on quantity calculations. This helps to identify transactions that increase or decrease quantities for a specific date (physical inventory) or over a period of time (item activity).

Why does my Valuation report summary show an unexpected average cost?

Average costing uses your purchase price (the invoiced cost, not the received cost) to automatically adjust sales costs over time.

On October 1 you order and then receive 10 hammers but the vendor has not yet sent you the bill for them. The average cost for the hammers purchased at that time is $2/hammer.

You then sell 8 hammers at $2 each on October 4.

On October 20 you get the vendor bill and the cost was actually $2.15/hammer. As the average cost of those hammers you sold on October 4 was lower, the sale reports a higher cost of goods sold (COGS). Running the Maintain Inventory Valuation tool regularly will automatically make this adjustment for you.

Adjustments, such as Landed Costs, also affect average costs.

Monday you purchased a case of printer paper from a vendor for $100.

Friday you get a bill from the shipping company for $20. You enter a Landed Cost adjustment of $20.

Now the average cost for each package of paper in the case is different during the period, Monday through Friday. Any paper sales occurring between Monday - Friday will have the cost updated by running the Maintain Inventory Valuation tool.

How does my negative inventory setting affect COGS reporting?

The default configuration in Inventory Control does not allow negative inventory transactions. If you choose to allow negative inventory transactions, you can sell inventory you have not yet received in a warehouse.

If you have a warehouse with 3 hammers in it, and you choose to sell 5 hammers, this means you have a negative quantity ONHAND of -2.

How can I keep COGS updated?

If you're frequently seeing incorrect COGS in reports, use the Maintain Inventory Valuation (MIV) tool to automatically update cost of goods sold in the Inventory Control subledger and the General Ledger. Running MIV nightly keeps your costs as accurate as possible.

The MIV tool does not add or remove transactions, it only updates the costs and the General Ledger posts for those costs.