Inventory reconcile issues????

[MWING]

We are a midsize Toyota dealer using R&R. We have an ongoing problem with an imbalance in our parts inventory value. After reconciling each month, accounting is showing less inventory then what parts shows. It grows each month. Over a 3 year period we have done 2 inventories and they have verified what R&R shows we have, is what we have. After doing a physical inventory we made a manual correction on the accounting side. We are good for a month and the problem continues. We are not talking small amounts. After a year it’s between $50-70,000. We believe we have gone over every possibility twice and sometimes 3 times and can’t find anything. I have come to the conclusion that somehow something on the accounting side is relieving the inventory twice. This is a shot in the dark for us, but I’m hoping someone out there has had this problem and found the solution.

[lochstein]

Do you have your price tape load daily/monthly? Toyota has a daily load option with R&R, maybe they can help you set that up. Typically, their prices only change monthly. If the accounting dept is not booking the appreciation (or depreciation) properly, you will be ahead. There are other factors that could also cause this, but this is the most common. Make sure the accounting dept books the appreciation value that is run on the first of the month before she closes that month. In other words, If you run your price tape update on 5/1 and the total appreciation is $1000, make sure she books the $1000 on her GL in May before the close. Sometimes, Parts Managers and Controllers book the value in the wrong month.

You also might want to make sure that your invoices at month end are truly reflective of when you posted the parts. Dealer Tire will always have a 3 day delay and you could have $1000s of tires in your pad that aren't billed till the following month. Toyota also has a habit of lumping different shipments in 1 invoice and we always have to reconcile those out because we got billed for parts that we didn't receive. The controller will book the invoice in the month that it is dated regardless of when you posted the parts, so you need to make sure you reconcile them out. Opposite goes for parts (i.e. Dealer Tire) you received that were not invoiced.

There is a good form here from Mike Nichols that really helps explain it, check the free stuff section. You can also PM me for more info.

Good Luck!

[possum]

You might need an R&R rep to come in and do a complete journal review. First though run 3627 opt. 12 and 2571 and proofread. You'll go cross-eyed but it's worth familiarizing yourself with these reports. We have several makes so ours is really convoluted.

[lochstein]

possum has a good point. Are you using more than one inventory GL? If so, when you say you are ahead, do you mean as a whole or in just one GL?

[Mike Nicholes]

There are a couple of forms that might help you. go to www.partsconsulting.com; go to the download section and download the reconciliation forms and the key to the reconciliation; you might find these useful in identifying your problem.

In addition; get a list from your system of the fastest moving 200 part numbers and start counting (just them) every month. If the count on the shelf and the count in the bin match; and if your "parts side" reconciliation match... and if you still have an error; it is probably in accounting and the application of the right debits and credits to the general ledger. Any bookkeeper does not want to hear this, but clean your own house first before pointing fingers at "the big guns"

Mike Nicholes

[X476]

and if you still have an error; it is probably in accounting and the application of the right debits and credits to the general ledger. Any bookkeeper does not want to hear this

Your not kidding, if you if you make that acusation with out proof, you had better get your resume in order. Bookkeepers NEVER make eoors just ask them

[vtecmanager]

I had the same issue but not on the scale you did (small store). We switched DMS and a cost of sale account was not entered in the internal sales type. Being that store sold to UCD/NCD at a cut rate (that's one issue) and tires were in the main source (another issue I fixed) I didn't not see it in the gross numbers. Finally after 4 months and a concerned GM I decided to look at each parts transaction on the accounting side.....every RO, every posted PO, and all parts invoices (issued by us and posted from the factory). This type of digging might be your only hope. It's either a procedure issue or a setting issue as long as the plus/minus adjustments are minimal. Just my 2 cents.

[JustBob]

The information posted from Mike N and others is quite useful. Having seen this scenario several time a likely cause is the General Ledger Coding established for each sale.

FYI - In the case you describe that Book Inventory is less than Physical it is possible the Accounting Profit for Parts is less that it should be. Most likely you incentive pay is based upon Accounting numbers.

Each sale category creates:

1. Debit to Cash on Hand, Credit Cards, Receivable of various types, Used or New Car Inventory or an expense.
2. Credit to a Sale Account. Maybe more than one
3. Debit to a Cost of Sale Account. Maybe more than one
4. Credit to an Inventory Account. Maybe more than one
5. Credit to a Sales Tax Account if applicable.
6. Other possible Accounts that a conniving General Manager or Owner is using to manipulate the data to their liking.

Within your DMS Parameters are established to direct each sale to the proper accounts. Once this is done the transaction goes to those accounts unless changed manually in Accounting prior to posting. There may not be an opportunity to make changes in Accounting - posting is automatic or semi-automatic.

In a typical office the personnel responsible for posting these transactions may not understand the process but a merely following steps they were taught possible by someone that did not understand the process either!

There are at least 5 different types of Sales Parameters established and most likely more. These would have been initially "built" when you DMS was installed. The person doing them may have fat fingered an account number or was ignorant of the correct Account number. They could have also been modified by someone after the installation.

To resolve:
Request Accounting to print out ALL of the PARTS and SERVICE Sales Parameters. Hint - if they do not know how to do this that indicates they most likely have never reviewed them. Review these making certain all sales are relieving inventory.

One possible common miscoding - Shop Supply charges relieving Parts Inventory when Accounting has already charged them to Expense.
There a multiple other possible miscodes.

This may not be the problem but worth looking into. In addition there are other possible causes mentioned by others. The consistency of a monthly difference indicates a repetitive occurrence not a one time mistake.

Good luck! repost if you need further clarification or assistance.

[Zep33]

Great info JustBob!!

[robc]

The first thing I always go to is how physical appreciation is booked. Most commonly on oil and other bulk fluids. Do you "re-stick" the tank and set it back to current for oversold oil and fluids? If this isn't given to the office the pad value will increase but not the G/L.

The next thing I do is look for outside part errors, usually tires if prices fall (not likely right now)

Last I suggest running receipt reports when you inventory parts to make sure what you receipted the parts for matches what accounting inputs.