Mar 3, 2013

Year End Closing in Oracle ERP...

My questions related to the year ending procedures adapted by 
companies using Manufacturing modules of ERP. The scenario is such

1. The Customer Order De coupling point is Engineer To Order
2. The manufacturing lead time is around 30 -40 days
3. the customer wants to end his year very close to the calender 
year. It is group of companies and they want to close all the 
companies together
4. Hence at the time of closing of the year there are open 
Production Orders in various stages of production.
5. Once these production orders are complete, the books(Journals in 
our case) of the closed year need to be reoponed
to update the resultant accounts in General ledger.

Kindly let me know what do manufacturing companies do in the year 
end? I can think of asking the customer to first complete all the 
Production orders and then close the books. but the customer is not 
able to do so. I would like to know what is the standard 
manufacturing practice on this.

Ramaswamy V K - Hi

Almost all the ERPs allow 'Preliminary Close' where transactions can 
still be completed in the period but books can be closed to get a 
proforma financial reports. This enables the companies to prepare 
proforma adjustment journals.

In your scenario, you need to ask the customer following questions.

A. Are the production orders closed in the next period or do they 
want the closure to be reflected in the previous period. For 
example, if the Production Order raised in December is closed in 
January, ideally the closure should be reflected in January and not 
in December. However, what happens in many organizations is that the 
physical closure happens in December, but the Data Entry in the 
system happens in January. In this case, they can enter the 
effective date in December and proceed. In this case they will do 
the following
1. Preliminary Close the periods and transfer the journals to GL. 
Prepare proforma finanicial statements
2. Complete / close transactions in the system effective dated 
3. Final close the periods in Subledgers and transfer the journals 
to GL. Prepare Proforma TB. Close the Period in GL
4. Pass the adjustment journals in GL in the adjustment period if 
any. Else pass these journals in the last period before closing the 
books as discussed in step 3.

B. If the production orders are actually closed in the next period 
then there is no problem. You can follow the normal process.

Further clarifications will depend on which ERP product you are 
using and the exact business scenario. The above detail that I 
mentioned relate to Oracle Applications.

Hope this helps.


Ramaswamy VK

1 comment:

ERP Products said...

Yes, this is true ... same ERP solution for different manufacturing unit process can not be successful procedure. This is a wrong way and the result will be not positive.
The solution for each business process should be customized and industry specific.
Thanks for this good information.