Efficiently Reconcile MM and FI Inventory Values

  • by Akhilesh Mittal, Lead Consultant, Infosys Technologies Ltd.
  • November 4, 2009
Understand the reasons that cause inventory value discrepancies in materials management (MM) and FI. Learn how to avoid these discrepancies by means of adequate master data and configuration checks. Understand how to identify and resolve MM and FI inventory value discrepancies.
Key Concept

Material movements originate in materials management (MM) and denote physical movement of materials. Material movements affect inventory quantities. Inventory quantities have a value and any change in inventory quantity also results in a change in inventory value. All the material movements are not relevant for valuation. The material inventory value is maintained in both FI and MM.

For a manufacturing organization, the inventory value of a material is the cost of manufacturing the material. For retailers and traders, it is the same as the procurement cost. Inventory value is a current asset that is reported on the balance sheet to satisfy legal requirements.

Inaccuracy in inventory values may arise due to incorrect inventory quantities or inventory valuation issues in your SAP system. Organizations follow the cycle count process to physically count the inventory quantities and reconcile them in the SAP system. Incorrect valuation is a system issue and arises due to incorrect configuration settings and incorrect transaction postings in the SAP system. The difference in inventory value between materials management (MM) and FI is an indicator of incorrect valuation.

I’ll show you how to:

  • Understand the reasons leading to inventory value differences in MM and FI

  • Implement preventive checks and measures to reduce MM and FI inventory value differences

  • Identify and reconcile MM and FI inventory value differences

Akhilesh Mittal

Akhilesh Mittal is a lead SAP consultant at Infosys Technologies Ltd. with eight years of consulting and industry experience. He has experience in FI and CO along with exposure to SD. Akhilesh is currently a consultant in the SAP space for a leading organization in the high technology domain. He has a degree in electronics and communication engineering from IIT Guwahati and an MBA in finance and systems from IIM Lucknow.

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Comments

3/31/2014 3:49:48 PM
Carol Tucker

HI
I was just wondering how you to reconcile the inventory when there are multiple currencies - the reports display company code currency but what about LC2 currency? thanks

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