Phillip R. Kennedy

The inventory valuation never matched what we had actually paid. We kept chasing it anyway. A purchase order went in with the wrong cost. It got posted that way when the goods arrived. Somebody changed the cost later and never carried the change through. Now a layer of inventory sat in the system at a price nobody had paid. So we made a pricing adjustment to bring it back in line. And the next one popped up somewhere else. I have decades of stories like that. None of them end with it tying. The purchasing side didn't always feel the need to enter POs and costs correctly, or to post them correctly once the goods were received. Standard cost against actual, on FIFO, made it harder. Add real lot tracking and it was a mess. The quantities tied. We knew what was on the shelf. The valuation was the part that swung up and down when we calculated it at expected cost. And it wasn't a mystery. We could track down every transaction behind it. Getting them to settle was the problem, because people kept entering wrong information. It just seemed like whack-a-mole. You couldn't get it actually correct. People get so hung up on numbers tying to the penny. I understand why. A number that doesn't tie feels like a number you can't trust. But for real-time inventory valuation, even if it's directional, it's fine. Other numbers are different. Sales, invoice, and transaction dollars are easier to tie. When one of those is off, it's usually a formula error, and somebody should find it. There are limits to directional, too. I once worked with a company that believed in its margins until an ERP and strict processes showed they barely had any. Close enough was never going to be fine for that. I still haven't seen a clean way to make real-time valuation tie when lot tracking is in the mix. If you have one, I'd like to see it. Which number is your team chasing to the penny, and is it broken or just moving? ➕ Follow me (Phillip R. Kennedy @prokennedy ) for what I've learned keeping the numbers honest between the order and the cash.