If you run Vinsight as your master record for inventory, then you can also use our reporting to give you inventory valuations and reports on changes in valuations due to things like sales, purchases and production. Generally you can think of end of period tasks in 3 steps verifying your data, running journals using that data to synchronise your asset ledgers and then reconciling your balance sheet against your inventory values to ensure they agree.
In this document:
1. Finalize any Outstanding Despatches, Receipts and Operations to ensure inventory levels reflect all the work you have done to date. For more information read Inventory, Valuation and Reporting.
2. Ensure your stock levels are accurate (if not, adjust using a stock take)
3. Ensure an accurate Standard Cost is set for each Stock Item. If you are using our production app and do bottling/packaging, ensure you have reviewed and accepted the values from this packaging runs.
4. Run the Stock On Hand Report (Reports > Account > Stock On Hand) at the end of each month. This will report your stock valuation on the day that you run it, thereby giving you your Closing Valuation for the current month, and, once adjusted, your Opening Balance for the next month.
5. If you are using the production App you will also want to check the Bulk Work in Progress Asset Ledgers against your Bulk Work in Progress in Vinsight.
Your accounting system’s inventory current asset ledgers should still show the closing balance from the previous month as their opening balance for this month, (possibly already reflecting purchases posted to the asset ledgers).
We will use the basic accounting principle:
Opening Balance – Sales + Purchases (+ Produced) = Closing Balance
Assuming you did the previous month’s adjustments correctly, your opening balance should be accurate. You can now proceed to do any necessary journals, these are easy to remember, the ABCs of Journals, Additives and Adjustments, Bottling and Cost of Goods Sold.
This tells us the amount that we have to reduce our Asset Ledger and increase our Cost of Sales expense by. Each stock item sold must have the Asset Ledger and the Standard Cost set. If using Xero, your Vinsight Ledger Codes should match your Xero Ledger Codes. See Posting Asset Ledgers to Xero for more details. If using a combined, sales & delivery option (See Cost of Goods Sold or Delivered ) the ‘Sold, Not Yet Delivered Liability Account must be set up, both in Xero and in your Vinsight-Xero configuration.
Purchases
Unlike sales, if you have the Asset Ledger Code set and post a purchase to Xero, then the purchase price will post to the Asset Ledger in Xero automatically. The only variance might be if the Purchase Price (posted to Xero) varies significantly from the Standard Cost, (used in the stock valuation). You can use the Purchases by Product Report to help identify this. (Reports > Buy > Purchases By Product). You should only put an Asset Ledger Code in each inventory Stock Item, purchases of these items will increase the asset ledger, usages will decrease the asset ledger.
Once posted, in theory your closing balance in your accounting system should match the current Stock On Hand Valuation report from Vinsight effectively validating the equation “Opening Balance – Sales + Purchases + Produced = Closing Balance”. You can run the Stock On Hand report and group by Ledger Code to compare against the values on your Balance Sheet in your accounting system.
You should audit any differences and, in the first instance, find and remedy any key differences at source. If needed, journal a variance to bring them into balance.
The above process is designed maintain your balance sheet current asset balances by taking your inventory purchases, bringing them into inventory on hand, then using them to produce bulk product, then once packaged, move these costs to finished items, and finally move them off the balance sheet and expense them to Cost of Goods Sold.
So a recommend chart of accounts might look like this depending on what activities you do in your business:
Grower Additives -Current Asset (chemicals and fertilizers etc not yet used)
Grower WIP -Current Asset (Work in Progress before harvest)
Bulk Additives -Current Asset (ingredients not yet used)
Bulk WIP -Current Asset (Wine,beer, spirits etc that is not yet packaged)
Packaging -Current Asset (Packaging not yet used)
Finished Items -Current Asset (Packaged items ready for sales)
Cost of Goods Sold -Expense (once sold, Finished items are moved off the balance sheet and expensed to this account).