Month End Inventory Close what happens

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Posted on by Michael agostini

Dear D365 Community,

I understand when we close inventory for the month there are three steps, Check open quantities, Check cost prices, Close inventory.

My question is what exactly happens when we close inventory financially. I understand the period is closed but what happens to any PO's that have been received or SO's that have been shipped.

Thanks very much

Michael A

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Juanse 660 on at

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This is a hard question to answer, perhaps you can narrow down the scope of the question. But basically the system will match invoiced PO's to sales orders to allocate the correct COGS value to the sales orders based on the inventory model selected (FIFO, weighted average..etc) once inventory is closed you won't be able to post new PO receiving or new sales orders in the closed period. Also, no changes to posted PO's can be done. Note that only fully invoiced PO's are closed, those with receiving can get an invoice posted in the next period. No more transactions that affect inventory value can be posted in the closed period

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André Arnaud de Cal... 300,911 Super User 2025 Season 2 on at

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Hi Michael,

There is documentation what happens in detail. You can start reading this documentation page and consecutive pages which explains about physical and/or financial updates, FIFO, LIFO, Average, marking and more. docs.microsoft.com/.../about-inventory-close.

The received POs or shipped SOs will be available for new postings, but only with a date after the last close.

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Michael agostini on at

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Hi Andre,

Questions:

1) Based on the text below how does the amount differ, when you run the month end close, from using the calculated running average cost price if you have a valuation method of average cost.

2) If you choose to have the GL updated verses not what is the difference?

Thanks Mike A

The Microsoft Dynamics AX inventory close process settles issue transactions to receipt transactions based on the inventory valuation method that is selected in the item’s item model group. You can also choose to have the general ledger updated to reflect the adjustments that have been made.

However, until inventory close or recalculation is run, Microsoft Dynamics AX posts issue transactions at the calculated running average cost price.

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André Arnaud de Cal... 300,911 Super User 2025 Season 2 on at

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Hi Michael,

1) There can be a difference between the running average and the valuation method average cost. This can occur if the transactions are not posted in the same order as they physically happened. E.g. first all PO's posted and end of month inventory transactions back dated. It will then review what should be the correct average cost.

2) There will be an imbalance between inventory cost details and your GL. I would not recommend to skip the GL update.

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Michael agostini on at

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André

It sounds like you are saying at month end D365 will update "all" Sales Orders (GOGS) to reflect (in our case) teh valuation method = average cost where applicable. But I am still not clear on the actual mechanics of this from a cost perspective.

Does D365 use one average cost for all SO's in a month. That number is constantly changing. Or does D365 use the average cost at the time the customer Invoice was posted based on posted vendor invoice costs up to that point?

Not sure if I am making any sesne here.

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André Arnaud de Cal... 300,911 Super User 2025 Season 2 on at

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Hi Michael,

Did you find this part also on the documentation pages? docs.microsoft.com/.../about-weighted-average-with-physical-value-and-marking

It explains what is being evaluated and corrected.

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Rahul Mohta 21,032 on at

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in a nutshell

all issues gets revalued based on costing method

e.g. if costing method is weighted average and some sales invoices had been posted then D365FO would revalue the COGS based on arrived inventory cost

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Guy Terry 28,924 Moderator on at

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Hi Michael.

Check open quantities and Check cost prices are, in my view, optional steps (and, again in my view, not worth the bother).

However, there is another process which you should not skip. It's called Pre-closing, and you can find it on the Closing and adjustment form. You should run Pre-closing before you run Closing!

For you other questions, I think you need a bit of background reading; the documentation around the links that André has posted is good. My favourite introduction is something called Hands-On Lab: Costing and Inventory Valuation in Microsoft Dynamics AX 2012. You might be able to get hold of it with some Googling.

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Rahul Mohta 21,032 on at

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hope you are able to use recal, reclosing and closing to follow month end inventory closing

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Michael agostini on at

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Thank you for all your responses. :)

One of the key questions I have is as follows:

1) We are using average cost as the inventory valuation method

2) If we do SO's and PO's during the month what scenarios would trigger adjustments on the month end close where the running average cost amount is different from the average cost.

Example

PO 10 at $100.00 each (post invoice)

SO 2 at 100.00 (post customer invoice)

PO 10 at 200.00 (post receipt)

run inventory close

Would the close make an adjustment because physical and financial inventory is different in the scenario above.

Thanks Mike A

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