Distribution Software Documentation - Creating a Beginning Inventory

Now that all the master files are in place, the first thing you need to do is set up your beginning inventory. For our purposes here, “beginning inventory” means the physical count of inventory items at the point where you start using The Application to carry out daily business transactions. Because The Application maintains a perpetual inventory, it makes sense to set up the beginning inventory only if, from that point forward, you will be keying into the system all transactions that affect inventory. If you choose to run The Application in parallel with your existing system for a time, it is important that all transactions be entered into The Application as well as the old system.

Of course, you can take a physical count at any time to verify and adjust the inventory levels in your system. Also, it is possible to use other functionality afforded by The Application without maintaining an accurate perpetual inventory. You can use The Application to purchase, sell and ship goods and post receipt of payments for those goods without creating a beginning inventory. Just be aware that any information regarding inventory levels generated by the system will be unreliable.

If you are ready to create a beginning inventory in the system, the first thing you need to do is take a physical count of your inventory. The Application provides you with a Physical Inventory Worksheet (Figure 48) for this purpose based on the inventory items you created using the Inventory File Maintenance form. This worksheet can be printed by selecting File Maintenance Physical Inventory Physical Inventory Worksheet.

Figure 48: The Physical Inventory Worksheet

[Click here to view full-size image]

The Physical Inventory Worksheet has four columns: Item, Physical Count, Description, and On Hand. The Item column displays the number you assigned to each inventory item using the Inventory File Maintenance form. The Description column displays the description you gave each item (including the brand and pack). Between these two columns is the Physical Count column which provides you with a blank line for each item on which you can write the number of items counted as the physical inventory is being taken. The last column, On Hand, displays the number of items on hand according to the system’s perpetual inventory. When you create an inventory in the system for the first time, you should only see zeros in the On Hand column. When writing down the counts, remember that your inventory items are tracked using one of three measurements: cases, units or pounds. Be clear which measurement is referenced when writing down the counts on the worksheet.

Once you have completed the physical count and filled out the Physical Inventory Worksheet, you are ready to enter the new inventory information into the system. This is done using the Enter Physical Counts form (Figure 49) found under File Maintenance Physical Inventory Enter Physical Counts.

Figure 49: The Enter Physical Counts Form

The textbox at the top-center of the form is where you want to enter the inventory item number. You can key this number from the Item column on the Physical Inventory Worksheet as you work down the list, or use the F3 SEARCH KEY.

When you have entered an inventory item number, the Current Inventory column will display the quantity on hand according to the system. The Counted Inventory column displays the amount of the physical count and should show zero when you are entering the physical count. If you go back to look at this item again after entering the physical count, you will see the amount you entered in the Counted Inventory column.

There are two things to keep in mind when using the Enter Physical Counts form: Unlike all the other forms in The Application, this form requires that you use the Enter key, rather than the Tab key, to move from one field to another. This allows a user who is entering data from the Physical Inventory Worksheet to input data using the 10-key pad without having to shift to the main keyboard or the mouse. The other thing to be aware of is that, if there are already values in the Counted Inventory column, any amounts you enter in the input fields will be added to those amounts (Figure 50).

Figure 50: The Cummulative Nature of the Enter Physical Counts Form

[Click here to view full-size image]

After you have updated all the inventory counts to match the physical inventory, you can run the Physical Inventory Verification Worksheet (Figure 51) found under File Maintenance Physical Inventory Inventory Verification Report.

Figure 51: The Physical Inventory Verification Worksheet

[Click here to view full-size image]

This report has seven columns:

Item – Displays the item number
Description – Displays the description, including brand and pack
On Hand – Displays the inventory count as it stands in the system
Physical Qty – Displays the inventory count you just entered using the Enter Physical Counts form based on the physical count
Variance – Displays the difference between the On Hand figure in the system and the Physical Qty. Variance equals On Hand less Physical Qty
Actual Cost – Displays the cost of each item from the Actual Cost field on the Cost Information tab on the Inventory File Maintenance form
Extended – Displays the cost of the inventory based on the physical inventory count. The dollar value in the Extended column equals Physical Qty times Actual Cost

The variance column of the Physical Inventory Verification Worksheet should be reviewed and any excessive variances investigated. What constitutes “excessive” is something that will need to be determined by those responsible for inventory controls.

Once you have reviewed the worksheet and are comfortable that the figures in the Physical Qty column are accurate, you are ready to take the final step in updating your inventory to replace the counts in the system with your physical counts. This is done by accessing the Convert Physical Counts form (Figure 52)found under File Maintenance Physical Inventory Convert Physical to Actual and Zero Physical Counts.

Figure 52: The Convert Physical Counts Form

The Convert Physical Counts form is a very simple form that first warns you that the conversion of actual inventory counts to physical counts cannot be undone, and then gives you the option of converting only those items for which you currently have a physical count entered. If you don't select the Convert Counted Items Only checkbox, those items for which you have not entered a physical count will be set to zero inventory. If you do select the Convert Counted Items Only option, only those items for which you have entered a physical count will be converted, and the remaining items will be left at the inventory levels currently in the system. Once you hit the Convert Counts button you will overwrite the system’s “actual” inventory (the counts that appeared in the On Hand column on the Physical Inventory Verification Worksheet) with the physical counts you entered using the Enter Physical Counts form (and which then appeared in the Physical Qty column on the Physical inventory Verification Worksheet). As the Convert Physical Counts form tells you, this conversion cannot be undone. All the “actual” (On Hand) counts will be lost, so be sure you are comfortable with your physical counts and have followed the above procedures correctly before you click the Convert Counts button.

Once you have converted physical to actual, you can run the Inventory Valuation Report to see verify your new inventory levels (Figure 53).

Figure 53: The Inventory Valuation Report

[Click here to view full-size image]

Your system inventory now reflects your physical counts.

Using the Application

TOC

Purchase Orders