Weighted average inventory accounting in Dynamics AX

I’ve already written a couple of posts about Weighted average inventory costing, but because they say good things come in threes, here’s the third. I discussed the difference between weighted average and date weighted average here, and pointed out a common scenario which shows you a financial cost when you have zero stock on hand here, but I’ve just spent a couple of days investigating an issue where we had a negative financial cost with zero stock on hand, and it wasn’t the simplistic example I posted above (which was just looking at the on hand at the wrong level of detail by storage dimension).

This has lead me to formulate some do’s and don’ts for weighted average costing (and it’s also finally weaned me of my previous preference for date weighted over weighted average).

I’ve been working in AX 2009 – however, for safety I’d assume that these guidelines apply equally to AX 2012.

Don’t have financial dates before physical dates. Here we are principally talking about the posting date you apply to an update > end of a production order (or post a purchase order invoice). The production order report as finish (or purchase order product receipt) is the physical receipt. Do have the financial date on or after the physical date on all your inventory transactions.

Don’t close inventory more than one month late. For instance, close January in February – not in March (or later). Do update > end production orders promptly, and do close inventory within a few days of the actual month end.

Don’t ignore error messages if you have to cancel a close. Unfortunately, inventory closing almost always generates a long Infolog warning you about items where the costs can be fully settled. These will typically be purchased items where you have posted the purchase order product receipt, but haven’t posted the vendor invoice yet; or production orders where you’ve posted the report as finished but haven’t update > ended the production order. So this kind of conditions us to ignore the Infolog from a close. But you don’t normally get an Infolog when you cancel a close. While I was working through my inventory accounting issue I cancelled a close and saw an Error Infolog like this:

Cancel close 31 Dec (ICV000092)
IAD000853
Cancellation
Date closed: 31/12/2015, Voucher ICV000092
Item ****
Could not delete a weighted average inventory closing transaction on item **** on date 9/12/2015.
Could not delete a weighted average inventory closing transaction on item **** on date 9/12/2015.
Item ********
Could not delete a weighted average inventory closing transaction on item ******** on date 10/12/2015.
Could not delete a weighted average inventory closing transaction on item ******** on date 10/12/2015.

OK. I confess. I didn’t notice this the first time I cancelled the close (it was actually on the third time through that I finally took notice of this error).

And finally: Do check the settlements and ledger vouchers posted by inventory closing and revaluation. The simplest way to check the settlements is to go to Inventory management > Periodic > Closing and adjustment > Settlements, and sort by the Adjustment amount (by clicking on the ‘Adjustment’ column heading a couple of times):


Check the ledger voucher by clicking Ledger > Voucher. (It might help to export the voucher to Excel and setup a simple pivot table by Ledger account and Amount if you have a lot of postings in your voucher because of financial dimensions).

Don’t ignore large adjustments. Obviously I have to leave what is ‘large’ up to your judgement, but I’d certainly be asking for help if I saw any numbers that I couldn’t pronounce, like this:


To sum up – if you want to use weighted average costing, keep your postings disciplined; and close inventory every month; and stay vigilant.

If you aren’t prepared to do that, use FIFO (or FIFO + Fixed receipt).


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