Hey y'all.
Today (this morning?), we're talking about Inventory Closing. Let's just jump into it.
What is Inventory Closing?
Inventory Closing is a critical process in Dynamics 365 Finance & Operations that recalculates the cost of inventory transactions. This is to ensure accuracy. This process adjusts the inventory cost to reflect actual costs based on purchases, productions, and other transactions. This process is typically a step included in closing the month financially.
Why is Inventory Closing Important?
Accuracy in Financial Reporting: Ensures that your inventory valuation reflects true costs, which is crucial for accurate financial statements.
Correct Cost Allocation: Allocates costs correctly to cost of goods sold (COGS) and inventory, preventing discrepancies.
Compliance: Helps maintain compliance with accounting standards and practices by providing accurate cost information.
What Happens If You Don't Perform Inventory Closing?
Inaccurate Financial Statements: Your financial reports may not reflect the true cost of your inventory, leading to potential misstatements.
Cost Discrepancies: Without closing, costs remain provisional and might not reflect actual expenses, affecting COGS and profitability calculations.
Audit Risks: Non-closure can raise red flags during audits, as accurate inventory valuation is a key audit focus.
Scenarios Where You Might Skip Inventory Closing
Trick question, you don't want to skip this step each month. Looking at you, finance team that says you're too busy.
High Turnover, Low Value Inventory: Businesses dealing in low-value, high-turnover items might skip closing if the cost impact is minimal.
Simplified Costing Models: Companies using standard or simplified costing methods may find closing less critical.
Operational Constraints: In some cases, operational constraints or system performance issues might necessitate skipping or delaying inventory closing temporarily.
How to Perform Inventory Closing in D365 F&O
Navigate to Inventory Management:
Go to Inventory management > Periodic tasks > Closing and adjustment.
Select the Inventory Model Group:
Choose the relevant inventory model group for which you want to perform the closing.
Set Parameters:
Configure the necessary parameters, such as the closing date and financial dimensions.
Run the Closing Process:
Click on the Close inventory button to initiate the closing process.
Monitor the progress and ensure there are no errors or warnings.
Review and Validate:
After completion, review the inventory adjustments and validate the cost recalculations.
Ensure that all transactions are accurately reflected in your inventory valuation.
Dad Joke Time!
Why did the scarecrow win an award?
Because he was outstanding in his field!
Signing off,
Dynamics Dad
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