Introduction
Welcome to this guide on how to migrate from a periodic inventory valuation system to a Perpetual Inventory Valuation system in Empress. This feature provides a continuous update on your inventory levels and cost, ensuring that your financial data is always up-to-date. This is incredibly useful for businesses, as it facilitates effective inventory management and accurate financial reporting.
How to Migrate to Perpetual Inventory Valuation
1. Syncing Your Stock in Hand Account
First things first, you’ll need to ensure that your Stock in Hand Account matches the actual stock value in your warehouse(s). This is achieved by creating a Journal Entry for the difference amount against an expense account, typically used in Purchase Invoice.
For example, if you’ve previously booked expenses via Purchase Invoices while perpetual inventory was disabled, you’ll now have to create a Journal Entry to shift the value of existing stock from the expense account to the stock in hand account. The Journal Entry would resemble this:
Cr. Expense account ......... XXX
Dr. Stock in Hand account ... XXX
This process can also work in reverse if you were selecting a stock in hand account in the Purchase Invoice.
2. Linking Your Existing Warehouse to Stock Accounts
Before you switch on Perpetual Inventory, ensure that Stock Accounts (ledger) are connected to your existing warehouse. You can set the stock account for a warehouse at three levels:
- Directly in the Warehouse master
- In the Parent Warehouse master
- Default Stock in Hand Account in the Company master, if you maintain just one Stock-in-hand account for all your warehouses.
3. Updating Your Stock Received But Not Billed Account
The Stock Received but not Billed account is an adjustment account that displays the value of the stock for which a Purchase Receipt has been issued, but a Purchase Invoice hasn’t been created yet. You’ll need to create a Journal Entry to update the value of open Purchase Receipt pending for billing into this account.
To find the value of the stock received but not billed, you can refer to the “Received Items Pending for Billing” report in the Accounts module.
The Journal Entry to update the value in Stock Received but not Billed account would look like this:
Cr. Stock Received but not Billed ........... XXX
Dr. Expense Account (COGS) .................. XXX
4. Setting Up Default Accounts for Each Company
Next, you’ll need to set up the following default accounts for each company:
- Stock Received But Not Billed
- Stock Adjustment Account
- Expenses Included In Valuation
- Cost Center
- Activate Perpetual Inventory
5. Activating Perpetual Inventory
Finally, you can activate Perpetual Inventory by navigating to your Company settings. You can do this by following this path: Home > Accounting > Company
By following these steps, you can successfully transition from a periodic to a perpetual inventory valuation system in Empress. This will enhance your business processes by providing real-time updates on inventory levels and costs, ensuring accurate and timely financial reporting. For more assistance, you can refer to additional resources or reach out to our support team.