Finding Inventory Variances

Inventory variances can occur when inventory costs are changed after inventory has already been sold or invoiced. This most commonly happens when additional expenses are allocated into inventory after the material has already moved through the system.

This document explains how to identify and troubleshoot inventory variances using the Inventory Roll Forward and Inventory Valuation reports.

Common Cause of Inventory Variances

A variance may occur when:

1. Inventory is purchased at an initial value.
2. The inventory is sold, picked, or invoiced.
3. Additional costs or allocations are added later.
4. The inventory value changes after the sale date.

Example:

• Inventory is purchased on March 1 for $1,000.
• The inventory is sold on March 12.
• Additional expenses are allocated into the inventory on March 20.
• The inventory value changes on March 20, even though the inventory was already sold.

Because of this timing difference, the Inventory Roll Forward and Inventory Valuation reports may temporarily show a variance until the system catches up and self-corrects.

How to Find Inventory Variances

Step 1: Run the Inventory Roll Forward Report

Run the Inventory Roll Forward report for the affected accounting period.

Review the report for:

• Unexpected changes in inventory value
• Variances between dates
• Inventory values changing after inventory activity already occurred

Step 2: Isolate the Date of the Variance

If a variance exists:

1. Run the Inventory Roll Forward report for smaller date ranges.
2. Continue narrowing down the dates until you identify the specific day the variance appeared.
3. Compare the values between each report run.

This helps determine:

• When the inventory value changed
• Whether multiple variances exist
• Which transactions may have caused the issue

Step 3: Review Inventory Allocations

Once the variance date is identified:

1. Review allocations, conversions, or additional expenses entered on or around that date.
2. Check whether costs were added to inventory after the inventory was already sold, picked, or invoiced.
3. Verify whether inventory value adjustments were entered after shipment activity.

Common transactions to review:

• Expense allocations
• Landed cost adjustments
• Conversions
• Regrades
• Inventory value changes

Step 4: Compare Against Inventory Valuation

Run the Inventory Valuation report for the same dates.

Compare:

• Inventory Roll Forward totals
• Inventory Valuation totals

If the inventory value changed after the inventory was sold, the reports may temporarily disagree until the later allocation date is reached.

Why the Variance Happens

The system retains the original inventory value until the later allocation or adjustment date occurs.

This means:

• The inventory may have already been sold
• The cost adjustment occurs later
• The valuation report reflects the original value until the adjustment date
• The system may self-correct in a later accounting period

Best Practices to Prevent Variances

To minimize inventory variances:

• Complete inventory allocations before invoicing inventory whenever possible
• Avoid changing inventory values after inventory has already been sold
• Review pending allocations regularly
• Verify landed costs before shipment completion
• Close accounting periods only after all inventory adjustments are finalized

Additional Notes

In some workflows, inventory may be picked before invoicing occurs. If costs are allocated during that time, variances can appear temporarily.

If a variance remains unresolved after the following accounting period, additional transaction review may be required to identify the specific allocation or adjustment causing the issue.