General Consultant Discussion

So trying to create some analysis reports for a client.

Most research I've found says Inventory Turnover is Net Sales/average inventory or CGS/Average Inventory.

The client would like to look at this at product line or individual item level.

This is all well and good if the client is a distributor.  They buy stuff, they sell stuff.  You know what you sold or what the cost of what you sold is.

However, if the client is a manufacturer and wants to see the Turnover of components, you can't really see what the sales or cost of sales are as they are component of something that is sold (and not necessarily 1-1.

How does a manufacturer typically calculate turnover??

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Mark Chinsky
Clients First Business Solutions
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From Sage's Help:

The Annual Turnover column on the Inventory Turnover Report is calculated as the number of inventory periods in the fiscal or calender year multiplied by the amount in the Number of Turns YTD column, divided by the selected period. If warehouse transfers are set to be tracked as issues in Inventory Management Options, all transfer quantities are included in the Quantity Issued YTD column and is used in the calculation of the Annual Turnover column.

The amounts in the Number of Turns YTD column are calculated as follows:

•If warehouse transfers are not set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued) / Average Inventory


•If warehouse transfers are set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued + Quantity Transferred) / Average Inventory


For example, if the report is printed as of period 3, you would have the following calculations:

•Beginning Balance Period 1 + Change In Period 1 = Ending Balance Period 1
•Beginning Balance Period1 + Change In Period 1 + Change In Period 2 = Ending Balance Period 2
•Beginning Balance Period 1 + Change In Period 1 + Change In Period 2 + Change In Period 3 = Ending Balance Period 3
•(Ending Balance Period 1 + Ending Balance Period 2 + Ending Balance Period 3) / 3 = Average Inventory


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Therese Logeais, Technology Integrators
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What is the definition of 'average inventory'?

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Mark Chinsky
Clients First Business Solutions
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Original Message:
Sent: 05-10-2019 11:20
From: Therese Logeais
Subject: Inventory Turnover Accounting Question

From Sage's Help:

The Annual Turnover column on the Inventory Turnover Report is calculated as the number of inventory periods in the fiscal or calender year multiplied by the amount in the Number of Turns YTD column, divided by the selected period. If warehouse transfers are set to be tracked as issues in Inventory Management Options, all transfer quantities are included in the Quantity Issued YTD column and is used in the calculation of the Annual Turnover column.

The amounts in the Number of Turns YTD column are calculated as follows:

•If warehouse transfers are not set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued) / Average Inventory


•If warehouse transfers are set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued + Quantity Transferred) / Average Inventory


For example, if the report is printed as of period 3, you would have the following calculations:

•Beginning Balance Period 1 + Change In Period 1 = Ending Balance Period 1
•Beginning Balance Period1 + Change In Period 1 + Change In Period 2 = Ending Balance Period 2
•Beginning Balance Period 1 + Change In Period 1 + Change In Period 2 + Change In Period 3 = Ending Balance Period 3
•(Ending Balance Period 1 + Ending Balance Period 2 + Ending Balance Period 3) / 3 = Average Inventory


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Therese Logeais, Technology Integrators
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Sorry, just re-read it, you answered that question.  Thanks!

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Mark Chinsky
Clients First Business Solutions
------------------------------

Original Message:
Sent: 05-10-2019 12:32
From: Mark Chinsky
Subject: Inventory Turnover Accounting Question

What is the definition of 'average inventory'?

------------------------------
Mark Chinsky
Clients First Business Solutions
------------------------------


Original Message:
Sent: 05-10-2019 11:20
From: Therese Logeais
Subject: Inventory Turnover Accounting Question

From Sage's Help:

The Annual Turnover column on the Inventory Turnover Report is calculated as the number of inventory periods in the fiscal or calender year multiplied by the amount in the Number of Turns YTD column, divided by the selected period. If warehouse transfers are set to be tracked as issues in Inventory Management Options, all transfer quantities are included in the Quantity Issued YTD column and is used in the calculation of the Annual Turnover column.

The amounts in the Number of Turns YTD column are calculated as follows:

•If warehouse transfers are not set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued) / Average Inventory


•If warehouse transfers are set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued + Quantity Transferred) / Average Inventory


For example, if the report is printed as of period 3, you would have the following calculations:

•Beginning Balance Period 1 + Change In Period 1 = Ending Balance Period 1
•Beginning Balance Period1 + Change In Period 1 + Change In Period 2 = Ending Balance Period 2
•Beginning Balance Period 1 + Change In Period 1 + Change In Period 2 + Change In Period 3 = Ending Balance Period 3
•(Ending Balance Period 1 + Ending Balance Period 2 + Ending Balance Period 3) / 3 = Average Inventory


------------------------------
Therese Logeais, Technology Integrators

------Original Message------

From Sage's Help:

The Annual Turnover column on the Inventory Turnover Report is calculated as the number of inventory periods in the fiscal or calender year multiplied by the amount in the Number of Turns YTD column, divided by the selected period. If warehouse transfers are set to be tracked as issues in Inventory Management Options, all transfer quantities are included in the Quantity Issued YTD column and is used in the calculation of the Annual Turnover column.

The amounts in the Number of Turns YTD column are calculated as follows:

•If warehouse transfers are not set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued) / Average Inventory


•If warehouse transfers are set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued + Quantity Transferred) / Average Inventory


For example, if the report is printed as of period 3, you would have the following calculations:

•Beginning Balance Period 1 + Change In Period 1 = Ending Balance Period 1
•Beginning Balance Period1 + Change In Period 1 + Change In Period 2 = Ending Balance Period 2
•Beginning Balance Period 1 + Change In Period 1 + Change In Period 2 + Change In Period 3 = Ending Balance Period 3
•(Ending Balance Period 1 + Ending Balance Period 2 + Ending Balance Period 3) / 3 = Average Inventory


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Therese Logeais, Technology Integrators
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So let's say they adjusted out a certain quantity due to it being defective, in your opinion should it be counted as consumption for purposes of turnover?

Most people think of turnover as stuff being sold or made (to be sold later).  If its 'bad' that would make poor quality increase turnover.

------------------------------
Mark Chinsky
Clients First Business Solutions
------------------------------

Original Message:
Sent: 05-10-2019 11:20
From: Therese Logeais
Subject: Inventory Turnover Accounting Question

From Sage's Help:

The Annual Turnover column on the Inventory Turnover Report is calculated as the number of inventory periods in the fiscal or calender year multiplied by the amount in the Number of Turns YTD column, divided by the selected period. If warehouse transfers are set to be tracked as issues in Inventory Management Options, all transfer quantities are included in the Quantity Issued YTD column and is used in the calculation of the Annual Turnover column.

The amounts in the Number of Turns YTD column are calculated as follows:

•If warehouse transfers are not set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued) / Average Inventory


•If warehouse transfers are set to be tracked as issues, the calculation is
(Quantity Sold - Quantity Returned + Quantity Issued + Quantity Transferred) / Average Inventory


For example, if the report is printed as of period 3, you would have the following calculations:

•Beginning Balance Period 1 + Change In Period 1 = Ending Balance Period 1
•Beginning Balance Period1 + Change In Period 1 + Change In Period 2 = Ending Balance Period 2
•Beginning Balance Period 1 + Change In Period 1 + Change In Period 2 + Change In Period 3 = Ending Balance Period 3
•(Ending Balance Period 1 + Ending Balance Period 2 + Ending Balance Period 3) / 3 = Average Inventory


------------------------------
Therese Logeais, Technology Integrators
------------------------------