If you need to reconcile your inventory in Business Central, the goal is to make sure the value entries and item ledger entries match what shows up in your general ledger. This article walks through the process: first you make sure your costs are adjusted and posted, then you compare the Inventory Valuation report against your inventory accounts in the chart of accounts.
The key conclusion is that your general ledger should match your inventory once costs are adjusted and posted to the GL. If you have automatic cost posting and automatic cost adjustment set to “Always” in the Inventory Setup, you don’t have to do anything manually. If not, you must run the Adjust Cost – Item Entries batch job before reconciling.
You verify the match by running the Inventory Valuation report for a chosen ending date, then comparing the totals per posting group against the corresponding inventory accounts in your chart of accounts for the same date.
Make sure costs are adjusted and posted to the general ledger
Before you can reconcile anything, your costs need to be up to date and posted into the general ledger. How much manual work this takes depends on your Inventory Setup.
In the Inventory Setup there are two relevant settings:
- Automatic Cost Posting – a checkmark that controls whether costs are posted to the GL automatically.
- Automatic Cost Adjustment – a setting that, when set to “Always”, keeps your cost adjustments running automatically.
If Automatic Cost Posting is set to true and Automatic Cost Adjustment is set to “Always”, you don’t have to do anything extra. The system handles it for you.
If these settings are not enabled, you have to run the Adjust Cost – Item Entries batch job manually. This batch job makes sure all item entries are adjusted, and from there you can post the values into the general ledger. Once this is done, your GL should be reconciled and fit your inventory.
Set up your inventory accounts in the chart of accounts
Open your chart of accounts and go to the inventory accounts. In this scenario the accounts are defined per item category, for example manufactured items, resale items, and raw materials, along with a total account.
If you don’t run manufacturing, you won’t have any work in progress, which means you won’t have a WIP account. Your account structure should reflect how your business actually operates.
Run the Inventory Valuation report and compare the totals
To check the actual inventory values, run the Inventory Valuation report. You choose the ending date you want to report on, and this date should be the same date you use when viewing your entries in the chart of accounts. Using matching dates is what makes the comparison valid.
The report shows the totals for each inventory posting group. In the example scenario the values look like this:
- Finished goods posting group: a value of 135,000.
- Raw materials posting group: 116,000 (note that you have to flip the sides here when reading the report).
- Resale posting group: its own value.
- Semi-finished posting group: its own value.
Each posting group has its own value, and they add up to a total in the report. That total, and all the individual posting group amounts, should equal the corresponding amounts in your chart of accounts. When the numbers line up, your inventory is reconciled against the general ledger.
What do I need to do before reconciling inventory against the general ledger?
You need to make sure costs are adjusted and posted to the GL. If you don’t have Automatic Cost Posting and Automatic Cost Adjustment set to “Always” in the Inventory Setup, run the Adjust Cost – Item Entries batch job first.
When do I not have to run the Adjust Cost – Item Entries batch job?
If Automatic Cost Posting is set to true and Automatic Cost Adjustment is set to “Always” in your Inventory Setup, the system handles cost adjustment and posting automatically, so you don’t have to run the batch job manually.
Which report shows my inventory value for reconciliation?
Use the Inventory Valuation report. It shows the totals per inventory posting group as of a chosen ending date, which you then compare to your inventory accounts in the chart of accounts.
What date should I use in the Inventory Valuation report?
Use the same ending date you use when viewing your entries in the chart of accounts. Matching dates is what makes the comparison between the report and the GL valid.
What does it mean if I don’t have a WIP account?
It means you don’t run manufacturing, so you have no work in progress. Your inventory account structure should reflect the item categories you actually use, such as finished goods, raw materials, resale, and semi-finished items.