Incorrect Inventory Value for Same Day Sale of Production Order Item

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I noticed that my “Inventory Value Summary” report for CY2019 is now showing different numbers then when I ran it last year. I tracked it down to be caused by a single inventory item that had a same day Production Order and Sales Invoice of 1/1/2019. Production Order for the item causes to add QTY count and cost, and the Sales Invoice for the same item will subtract the same QTY and amount which net out to zero. This is how Manager.io behaved last year, and this year, it behaves differently. It treats it as if the sale occurred BEFORE the production order so the drill down of item inventory amount shows “Insufficient QTY” and does NOT logs the sale cost as COGS. Is this a know issue? i.e. when the production order and sales invoice is the same day, to inventory item tally becomes incorrect? If I change the Sales Invoice date to Jan 2, 2019, all works as expected. But when I set it back to Jan 1, 2019, it ignores the sale invoice as “insufficient QTY”.

thanks,

2

You may have been using different versions of Manager that handled insufficient quantities for production orders indifferent ways. Read this Guide and see if it answers your questions: Understand insufficient quantity on a production order | Manager. The change occurred last year, after your transactions in question.

So it’s fair to say the former treatment was deficient. Eventually, everything worked out, but interim profit and loss calculations were incorrect.

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Thanks Tut. You nailed it. I did read the article before posting my question but it didn’t register when I first read it. I had ample lower production stage materials to use as BOM. However, I do have “just in time” production order where another production order on the same day was used to advance the material’s stage from RAW to WIP which in turn was the BOM for the item. Okay, so thanks for that. But I’m still not quite sure how to handle this. As the article states Manager handles it automatic and nothing needs to be done. Yet, I’m not getting the expected result, i.e. my sale (sales invoice) is up in air year-end inventory value incorrect. Crux of the issue is that two production orders, sale are all occurring in a single day triggering an insufficient quantity and is left that way to-date. I’m tempted to just adjust my item sale date to 1-day later with a note recording the handling. Is this an acceptable accounting/book keeping practice?

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@koko , your latest post sheds more light. You had not mentioned multi-stage production. That also complicates accounting for cost of goods. Because you had all those transactions on one day, you could have had and probably did have both insufficient quantity and production stage problems, all intermixed. So read and absorb this Guide: https://www.manager.io/guides/28367. Of course, Murphy’s Law ensured that the production stage concept was also introduced in 2020, after the transactions that are causing you problems.

In the end, accurate accounting will transfer the purchase cost of all raw materials, plus any non-inventory costs, from the Inventory on hand asset account to the Inventory - cost expense account (or whatever custom accounts you may have substituted for them) as inventory is sold. Purchase invoices, payments, and production orders can all be involved in originally establishing the value of inventory in Inventory on hand. But, because Manager uses an average cost inventory valuation scheme, those costs may temporarily be routed through Production in progress. And the final transfer to Inventory - cost may be held in abeyance until the proper quantity of material has been acquired and/or produced.

Before, I wrote that “Eventually, everything work[s] out…,” but eventually could—depending on exact circumstances—mean waiting until all items involved are not only sold, but depleted in quantity to zero. Of course, that could be unrealistic, because we want to obtain correct P&L figures for current accounting periods, when goods might be in various stages of acquisition or production. That is why those two big changes were introduced.

I’m not sure what you mean by this. How do you know what is “expected?” And what do you mean by your sales invoice being up in the air and year-end inventory value being incorrect? If you have resolved all insufficient quantity and production stage issues, Manager’s balance sheet and P&L will be correct, because the two problems that previously rendered them incorrect for interim periods have been resolved. You mentioned that you had left an insufficient quantity problem in place right up until today. That has to be solved, either through purchase, production, or both. Believe me, I know these can be thorny problems to trace. But you have to do it if want correct results.

No, and also unnecessary if you resolve problems of both types I have mentioned. If you do not fix them, you are just hiding problems that will resurface later.

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@Tut , Got it fixed yay! :smiley: Thank you very much!! As you suspected, two issues mixed. Incorrect production stage entries with BOMs and insufficient quantity issue unaddressed, resulting in wrong financials.

I needed to go back and re-assign the production stage level for all materials inventory via batch update. Once every item had the correct stage level, the multi-stage production order occurring on the single-day was handled with correct sequence automatically. This allowed the same day sales invoice to be processed correctly with the right BOM cost for the item and COGS reporting. Beautiful!

Previously, Manager was giving me warning via the “at least one inventory item needs to have production stage elevated” but I misunderstood the cause and left it unaddressed. So, 100% user error on my part. Manager is working flawlessly. I will make note to read the manual.

Thanks for the excellent support and product! Cheers.

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Thanks for the feedback. I confess I’ve been holding my breath. It is one thing to know these changes were supposed to retroactively sort out such problems automatically. It is quite another to know it happened in real life rather than some artificial test case with pulp, paper, and book or leather and purse. And it is very hard to think up realistic scenarios where the two issues are intertwined. I am glad it worked out.