Identifying Inventory Discrepancies in D365 for Finance and Operations, Part I – Using the Potential Conflicts Report
Posted on: March 9, 2018 | By: Jarrod Kraemer | Microsoft Dynamics AX/365
Authored by: Rosey McAdams
In previous blog entries, Understanding the Inventory Value Report Parts I and II, we have looked at how to setup and understand the inventory value report. This is a very important first step in being able to reconcile your general ledger inventory accounts with your inventory subledger, however since posting this blog we have gotten several inquiries on what to do when the two do no reconcile and how to identify what is causing a discrepancy between the balance in the GL accounts and the inventory value report. In this blog we are going to go through some steps to take to help identify the cause of a discrepancy between the inventory GL and inventory value report.
The first place to start in identifying an issue between what is posting to your GL vs. what is posting to your inventory subledger is the Potential Conflicts Report. This report will give a list of all the transactions that may be causing your GL to conflict with your inventory value report and why. Here are the steps on how to effectively use this report:
1) First make sure to select your inventory GL accounts for cost reconciliation in the leger integration policies parameters (this only applies to Dynamics 365 for Operations – for previous versions setup a totaling account – please reach out for more info on setting up a totaling account). To do this navigate to Cost Management > Ledger integration policies setup > Parameters
In this form select whatever main account category is setup on your inventory accounts under the Inventory field (for more info on main account categories please contact Logan consulting).
Once this is configured the potential conflicts report will recognize all accounts in this main account category as inventory accounts.
2) Once you have setup your inventory accounts for reconciliation you can now effectively run the Potential Conflicts Report to run this report navigate to Inventory Management > Inventory Value Reports > Potential conflict – Inventory and general ledger
3) Select a date range for running your report and click OK. If you know you have issues between your GL and your subledger select a small date range to get less results in the report making the report more manageable. (If you are using Dynamics AX versions prior to D365fO you will need to enter your totaling account on this screen if you have more than one inventory account – please reach out for more information.)
4) Review your results.
The screen shot below is what a clean potential conflicts report looks like – it looks like this it means you have no discrepancies between your GL and inventory subledger for the given time period. However, if you are reading this blog, your report probably doesn’t look like this.
The next screen shot shows a Potential Conflicts Report with a discrepancy, below I will explain how to interpret this data, and how to resolve the issues identified.
· First, we notice right away that there is an amount in the discrepancy field – this means that over the period the report was run the GL balances different from what was posted to the inventory subledger by this amount, in this example this is $192.22.
· Next, we see two sections calling out potential issues, the first section, Inventory, shows those transactions that were posted in the inventory subledger but not to the inventory GL. The second section, General Ledger, calls out transactions that posted to the inventory GL but not to the inventory subledger. Let’s look at these three issues:
o Issue A: An inventory issue, this transaction posted to the subledger but not to the inventory GL. By the conflict comments we can see that this was a receipt that posted to a main account that does not represent inventory. To research this issue, we need to look at all item groups receipt posting.
Our two inventory accounts are 140100, and 140150. In the screen shot above we find that the item group AudioRM has the receipt posting to an account that is not one of our specified inventory accounts. From the account description we can see that we wrongly set this up to post to the accrued purchases account. To fix this issue we need to change this account to our inventory account – 140100.
o Issue B: A GL issue, this transaction posted to the inventory GL but not to the inventory subledger. From the conflict comments we can see that this was caused by a direct posting (i.e. journal entry) to the inventory account – which obviously will not also post to the subledger. To avoid this from happening we should always mark inventory GLs as Do not allow manual entry.
o Issue C: A GL issue, this transaction posted to the inventory GL but not to the inventory subledger. From the issue comments we can see that this issue was caused by a non-inventory posting type posting to an inventory account. To research this issue, we need to look the item groups again to see if we have any non-inventory postings setup to post to an inventory account.
We know that our two inventory accounts are 140100 and 140150, and from the screen shot above we can see that we have the Purchase, accrual posting to an inventory account. This is what is causing our issue this posting should not post to one of our inventory accounts but rather a Received, Not Invoiced account. To fix this we need to change this account to the RNV GL account.
Now that we know the types of messages we will get on this report and how to fix them it is important to understand that by fixing the postings it will not clear out the conflicts that show up on this report for this time period – the fixes you make will take effect in all future transactions. Once you make fixes it is important to monitor the potential conflicts report going forward to make sure that these conflicts are no longer showing up on the report and that you have no additional conflicts.
The potential conflicts report is a powerful tool if you understand how to interpret the data. Hopefully you found this information useful and can start to use this report more effectively. In part two of this blog we will show another method that we use to help determine the cause of inventory discrepancies, stay tuned! For additional information on the potential conflicts report or other inventory related questions please feel free to reach out to us at info@loganconsulting.com or (312) 345-8817.
All the best!
Logan Consulting
www.loganconsulting.com