RapidReconciler Banner

The 3 Biggest Cons of Using a Snapshot of Perpetual Report

Edward Gutkowski, Chief Architect – Rapid Reconciler

RR picWhen creating a perpetual inventory report for reconciliation purposes, there are 2 methods to choose from:

1. Summarized Transactions – This means for each item in the system, the applicable cardex records must be added up, in both units and amounts, to get the perpetual number.

2. Snapshot – A report of item quantity balances and unit costs are captured at a specific time, and the balance is then compared to the general ledger balance.

Most companies I speak with use option 2, the snapshot approach, due to performance issues. Snapshots run much faster than summarizations.

Having spent 2 decades working with JD Edwards inventory, I recommend the summarization approach for the following 3 reasons:

  • Accuracy – At times item balances may not agree with summarized details.
  • Timing – An accurate snapshot depends on stopping production and does not account for backdated or forward dated transactions.
  • Rounding – Transaction amounts that are booked to the general ledger are rounded to 2 decimal places or fewer, depending on the base currency.

Let’s explore these in a bit more detail.

First, there are times when transactions don’t process fully, resulting in discrepancies between the cardex details and item balance. When this type of issue exists, it is important that we use the details to adjust the balance, not the other way around. If you opened a new savings account and made 2 $100 deposits, you would expect a balance on your bank statement of $200. What if it said $100, Which number is correct? If you have the 2 deposit slips (details) in hand, it would be tough to argue.

Second is timing. If you have operations that run 24X7 and need to do a period end snapshot, then operations must be halted. Once that happens there is a lot of work to do in order to get the GL to catch up. Sales update and manufacturing accounting must be run. Batches must be posted, all without errors. If operations start again before processing is fully completed, you’ll waste valuable time trying to separate out those transactions.

Lastly let’s talk about the impact of rounding. Let’s say we have item ‘A’ with a unit cost of .0942. Unit costs are typically specified at 4 decimal places. Now let’s say we receive 1 in:

Doc                     Type                   Qty                     Cost                    Amount

12345                 OV                      1                         .0942                  .09

You can see how the amount has been rounded down to 2 decimal places. If you ran a snapshot, you would get 1 x .0942 =.0942 rounded to .09. The GL would have .09 so all is in balance. So, what’s the problem? Let’s do a second receipt:

Doc                     Type                   Qty                     Cost                    Amount

12345                 OV                      1                         .0942                  .09

67890                 OV                      1                         .0942                  .09

Now how much would be in the general ledger? The answer is .18, matched perfectly to the cardex. The snapshot result would be 2 X .0942 = .1884, which rounds to .19. Now there is a .01 discrepancy between the snapshot and general ledger, where there is none when using summarization.

I hope this explanation convinces you that a summarized cardex report is a much more accurate and easier to reconcile than a snapshot!

If we can help with any questions, please email us at inquiries@getgsi.com or click Contact Us.