@jcox43 

It sounds like the scanning errors during your production operations have led to inaccuracies in your reported production costs, resulting in an overstated WIP (Work in Progress) Variance Account. Correcting this issue will require a few steps to ensure that your financial records accurately reflect your production activities and costs. Since the orders are already closed here are some steps you can consider:

1. Assess the Extent of the Issue:

   • Review the Transactions: Go through the production tickets where the scanning errors occurred to quantify the over-reported quantities and the resulting financial impact on your WIP Variance Account and Cost of Goods Sold (COGS).
   • Identify Patterns: Determine if the scanning errors were random or if there were specific conditions or practices contributing to the issue. This will help in preventing future occurrences.

2. Adjust Inventory Records:

   • Cycle Counts: Continue with cycle counts to adjust the raw material inventory quantities. Ensure that these adjustments are accurately reflected in your accounting records.
   • Finished Goods Inventory: If finished goods were also affected (either understated or overstated), adjust those inventory quantities accordingly.

3. Correcting Financial Entries:

   • Consult with Your Accounting Team: Work with your financial or accounting team to understand the best way to make corrections in your accounting system. This might involve journal entries to adjust the balances in your WIP Variance Account and COGS.
   • Documentation: Ensure that all adjustments are well-documented, explaining the reason for the adjustments, the method used for calculating them, and the impact on your financial statements.

4. Review and Adjust Production Tickets:

   • Although the production tickets are closed, you might need to review them to understand the discrepancies fully. Discuss with your VAR about submitting a ticket to Acumatica to see if there's a way to make adjustments for closed tickets, even if it's just for record-keeping and audit trail purposes. 

5. System Controls and User Training:

   • Review Scanning Process: Evaluate the scanning process that led to the errors. Determine if the issue was due to user error, system error, or a combination of both. Most of the time, it’s user error.
   • Implement Controls: Consider implementing additional controls in the scanning process to prevent over-scanning. This could include approval steps for unusually large quantities or even a final approval or QA check before finishing the order where it undergoes a manual review.  Yes it will take time, but far less than tracking down all these errors in the long run.
   • User Training: If user error contributed to the problem, additional training or clearer instructions might be necessary to prevent future issues.

6. Monitor and Review:

   • After making the necessary adjustments, closely monitor the affected accounts and production processes to ensure the issue is resolved.
   • Regularly review the WIP Variance Account and COGS to identify any unusual patterns or variances promptly.
   • Always continue with cycle counts to monitor variances.

Given the financial implications, it's crucial to handle these corrections carefully and in consultation with your financial auditors or advisors. They can provide guidance on the best practices for making these adjustments in compliance with accounting standards and ensuring that your financial statements are accurate.

Did you configure the Data Entry settings for the Production order type to not allow over completion?

We are running 2021R2 which has limited functionality for preventing over completion at the operation level. We are in the process of upgrading to 2023R2 which includes the functionality we require to stop these issues. We have stopped scanning until we are running 2023R2. 

Jamesh,

Thanks for the detailed response, I will take those into consideration but after digging into this a bit more I’m wondering how this would affect our COGS since that is based on standard cost. Wouldn’t labor and overhead credits cancel out the WIP Variance debits?

Would that mean all of our expense is related to material issues?

Sorry I know don’t have access to our P&L but me and our Finance Director are having trouble locating the issue.

I will also create an Acumatica case to see if they can help out.

Thanks

@jcox43 

A completed production order with a nonzero WIP account balance could be caused by any of the following:

• The materials required to produce the items have been issued in a quantity that does not equal the planned quantity calculated based on the bill of material assigned to the item.
• The number of labor hours reported for the production order differ from the planned number of labor hours.

If you correct the materials or labor recorded after you create the final inventory receipt for moving the finished goods to a warehouse, the system does not recalculate the receipt cost. An incorrect receipt cost affects inventory valuation and could affect the cost of sales if the item is a finished good.

I ended up creating a GI to identify how much material was “overconsumed” during production. Comparing this to our net inventory adjustments highlighted that we have not adjusted nearly enough material back into inventory. Once cycle counting is complete on the items identified, we should be back in alignment.

Thanks for your help.