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By Sanam Khan, Senior Consultant
I recently provided guidance for handling the inventory
close process using Microsoft Dynamics AX. In this followup article, I provide
five steps for completing the year-end 2009 inventory close in such a way that
you prepare your organization for handling the same process more efficiently in
1. Prepare to
run the inventory close.
Before you perform the inventory close, the following tasks are
sure that the inventory model assigned to the item on the Inventory model tab
of the Inventory model groups form is accurate. Inventory close will settle
transactions to each other based on the current inventory valuation method
assigned to the item.
or print the Open quantity report by clicking Inventory management >
Periodic > Closing and adjustment > Close procedure > 1. Check open quantities. This report
will print a list of inventory transactions that will remain open after the
inventory close is performed.
For example, you have an item
that includes the following transactions:
In this case, the report will show
an open quantity of 3, since this financial issue cannot be settled to any
transactions. The Open quantity report also includes a Show receipts option
that lets you view all the physical receipts posted for an item and all the
open quantities that will remain after an inventory close for the date
or view the Investigation of cost price for receipts report by clicking
Inventory management > Periodic > Closing and adjustment > 2. Check cost prices. This report
allows you to enter a maximum deviation percentage. Items that appear on this
report will be only those exceeding the
maximum deviation percentage. The deviation is based on the item cost price,
item or median cost price, or median.
Inventory close will settle issue
transactions to receipt transactions based on the inventory model you have
selected in the item's inventory model group setup. You also have to choose the
general ledger updated to reflect the adjustments created.
To close the inventory:
--Inventory management >
Periodic > Closing and adjustment > Close procedure> Close
To open the Close inventory
--In the Close inventory up to field, type or select the end
date up to which you want to close inventory.
--Select the Run recalculation after closing check box if you
want to run a recalculation up to the current date after the closing has
--Set any other options you want to choose for this inventory
After inventory close has
completed, the results will be reported in the Closing and adjustment form.
Steps that are performed by the Inventory Close routine:
When you run the Close routine,
Microsoft Dynamics AX performs the following steps:
whether any Recalculations were run after the date that you choose for your
Close. Microsoft Dynamics AX will cancel any of those later Recalculations
before the Close can start.
all the items that are to be processed into a queue. These items are stored in
Note: While a Close or Recalculation
is processing, you can click Calculation/Calculation List from the Close &
adjustment form to view the data in the InventCostList table. This shows which
items are still to be processed by the Close or Recalculation process.
--Process each item from that queue
sequentially. Microsoft Dynamics AX performs the following for each item:
--As soon as all possible transactions are
processed for that item, Microsoft Dynamics AX looks for any transactions that
are fully settled, and then updates those transactions to "Closed"
soon as all the items are processed, the settlement records that were created
are read and sorted by General Ledger Account. Then, Microsoft Dynamics AX
summarizes all the cost adjustments that were made, and a General Ledger
Journal is created and posted.
you select the Run recalculation after closing check box in the Close dialog
box, a Recalculation will be run for all items up to today's date.
3. Handle the
Inventory Recalculation Process
The recalculation process matches inventory receipts and
issues for the transactions that are not financially matched through inventory
dimensions in order to determine the real value of the on-hand inventory.
To recalculate the inventory, follow these steps:
Inventory management > Periodic > Closing and adjustment >
Recalculation to open the Recalculation form.
you want to select specific items or item groups to be recalculated, click
Select. Your selection displays in the Items field group.
the Recalculate inventory up to field, type or select a date up to which you
want the inventory to be recalculated.
in the remaining fields as required.
-- Click OK to start the recalculation.
The Inventory Recalculation routine performs a similar job to the
Inventory Close routine. However, there are a few differences. When you run the
Recalculation routine, Microsoft Dynamics AX performs the following steps:
--Checks whether any Recalculations were run after the date that
you choose to run your Recalculation up to. Microsoft Dynamics AX will cancel
any of those later Recalculations found before your Recalculation routine can
--Puts all the items that
are to be processed into a queue, and then store the queue in the
--Process each item from
that queue sequentially. Microsoft Dynamics AX performs the following for each
--As soon as all the items are processed, the cost adjustment
settlement records that were created are read, sorted by General Ledger
Account, and summarized and posted in a General Ledger Journal.
--Along with recalculation, you can also perform the following
functions from the same window:
4. Distinguish between recalculate and close.
recalculation results in adjustments that match inventory receipts to issues.
Unlike inventory close, it will not make a settlement and close a transaction.
same parameter settings are available for inventory recalculation as for
inventory close, but inventory recalculation can be performed on a subset of
inventory items. Inventory close must be performed on all inventory items.
inventory recalculation can be run on a subset of items, and because inventory
recalculation will not make an adjustment for less than the throughput amount,
it is not as accurate as an inventory close and should not be relied on to
replace inventory close.
5. Determine if cancellation required.
The latest closing,
recalculation, on-hand or transaction adjustment made can be cancelled. This
may be necessary if, for accountancy purposes, you need to make transactions in
the inventory in a closed period. The closing is canceled, but it can still be
viewed on the overview tab of the closing and adjustment.
Only cancellation of the last
closing made is allowed. Because closings are in effect up to a particular
date, if closings are canceled in periods between two other closings, there
would be gaps in the closing.
Reverse completed recalculation:
In some cases, you may need to reverse a
completed inventory recalculation, returning adjustments to the state they held before
adjustments were made.
Reverse a completed closing:
In some cases, you may need to reverse a
completed inventory close, returning settlements to the state they held before adjustments
were made. When you reverse a completed inventory close, inventory is also
reopened to allow for posting in the valid period.
Leveraging the inventory close process to your ongoing advantage:
-- Going forward in 2010, run inventory closes on a
monthly basis in order to make the Fiscal year process simple on the year end.
-- Try to record inventory data sequentially i.e. Receipts
followed by issues date-wise
-- Inventory close is the first step in the fiscal year
close process, so try to do it ASAP
-- You can still record transactions for the next year
even if annual inventory close has not been run.
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