ABSTRACT
SOFTWARE SOLUTIONS FOR THE INVENTORY MANAGEMENT
SOFTWARE FOR THE INVENTORY ACCOUNTING
Benefits
of Inventory Modules in Accounting Packages
Dimensions in Evaluation of Accounting Packages
SOLOMON IV for WINDOWS
Overview
of the product
Features
of inventory management modules
Inventory
Order Processing
Bill of Materials
Purchasing
Bar Coding
AN ADVANTAGE OF INTEGRATION
REFERENCES
Contemporary accounting software packages include modules, providing information for the management decisions. Issues of the inventory management in accounting packages are discussed using Solomon IV for Windows as an example. Integration of the accounting and managerial information contributes to the benefits of both, accountants and managers.
SOFTWARE SOLUTIONS FOR THE INVENTORY MANAGEMENT
If inventory of an
organization represents a significant investment of resources, managing
it is a monumental task. A detailed information is needed to track and
control the items that an organization assembles, stocks and sells. Software
solutions for the inventory management provide the information to make
better ordering decisions, organize inventory production and maintain sales.
The cycle purchasing -- inventory -- sales is important to any organization.
The results of operational activities within the cycle are reflected in
the accounting system of organization as revenues, expenses and assets.
Accounting software solutions are designed to provide vital information
about costs and profits, managing cash flows, collecting receivables, handling
payables, and control inventories.
Dealing with the cycle purchasing
-- inventory -- sales accounting and managerial software solutions share
the information. It gives the basis of embedding of the inventory management
solutions into the accounting packages. Contemporary accounting packages
deliver results to every manager in the company. Actually, they are not
"pure" accounting solutions. Best packages are integrated systems that
serve to the needs of the whole organization's business. In this
paper we discuss the ability of accounting packages to deliver information
for the inventory management.
SOFTWARE FOR THE INVENTORY ACCOUNTING
At present, modular structure of the accounting software packages became the industry standard. Many accounting packages contain 10 or more modules covering variety of activities. However, the cycle purchasing -- inventory -- sales together with General Ledger is common for them and serves as the basis of comparison (1).
Benefits of Inventory Modules in Accounting Packages
A detailed evaluation of
the benefits of the accounting software modules is given in
(4)
The analysis included such benefits as reduction of labor costs, increase
of sales, control of costs, managing cash and others. Summary of
the analysis is presented at Table 1. Implementation
of the Inventory Control modules in accounting packages allows the organization
to get maximum benefits in comparison with, for example, implementation
of the module Accounts Receivable.
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Dimensions in Evaluation of Accounting Packages.
There are many attributes in evaluating accounting software packages. For example, ease of learning is important for the installer and new user. Other factors include reliability, vendor support, ease of customization, documentation quality, etc. In our discussion we used selective set of criteria relevant to the inventory management issues. Among various publications regarding ratings of the accounting software packages we chose (2) which used the following measures for the package performance: speed of operations, flexibility to suit, integration of modules in combination with the overall rating. Ratings for the LAN-based PC Windows accounting packages are shown at the Table 2. Eight accounting solutions included to the Table 2 were the best-selling accounting software packages in 1996(3).
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| SBT Pro Series 3.0 | SBT Corp. | 2.3 | 2.0 | 2.0 | 2.5 |
| Progression Series 7.0 | Macola Software | 2.3 | 2.3 | 2.8 | 2.5 |
| Solomon IV | Solomon Software, Inc. | 2.6 | 2.5 | 2.0 | 2.5 |
| Dynamics LAN 3.0 | Great Plains Software, Inc. | 2.8 | 2.8 | 3.1 | 3.0 |
| MAS 90 | State of the Art, Inc. | 2.9 | 2.6 | 3.1 | 2.6 |
| Real World 7.0 | Real World Corp. | 2.7 | 2.5 | 2.5 | 2.5 |
| Platinum for Windows | Platinum Software Corp. | 3.4 | 3.7 | 3.6 | 3.8 |
| ACCPAC | Computer Associates, Inc | 3.3 | 3.3 | 3.3 | 3.0 |
Despite the third overall rating (2.6) Solomon IV for Windows (Solomon IV) possesses the highest score for the integration of modules feature. In addition, Solomon IV is characterized by the ability "to access, combine and integrate other databases with the accounting database." (2, p.3) High integration of the Solomon IV management and accounting modules is the reason to discuss it in detail.
Solomon IV for Windows is
more than financial software product. It is an accounting informational
system "for the Changing Needs of Business"(5). The
package was designed for the middle-market organizations as a foundation,
on which the informational system of the whole enterprise can be built
and extended. It was developed with industry-standard components and designed
to remove informational constrains, lower risk, enable growth and adaptability,
and increase the return of investment for the whole enterprise.
One of the main features
of the product is its ability to provide information for the inventory
management decisions. Modular structure of Solomon IV permits the
user to add core applications as the business operations of the organization
require. List of the modules of the package is shown at the Table
3. Along with modules, performing the tasks traditional for financial
accounting (column 2 at the Table 3 ), there are
modules which perform complex joint tasks for financial and operational
management (column 3 at the Table 3). They interact
seamlessly and each application provides common benefits to the Solomon
IV system.
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Even the structure of the
package (number of modules, tasks which they fulfill and interconnection
among them ) reflects the capability of the system to provide timely and
accurate information for the management decisions with the focus
on inventory management.
Inventory site management
-- Inventory sites identify physical warehouses, and inventory items in
the package are stored by site. It is important for warranty distinction,
isolation of defective parts, etc. All Solomon IV inventory management
modules can access and update inventory information based on site location
and specific locations withing the site. Any item can be stored in multiple
locations as well as any location can store multiple items.
Features of inventory management modules
Inventory
The Solomon IV Inventory
module gives the information to make better ordering decisions, organize
the inventory production, and track of Cost of Goods Sold. The inventory
file records combine accounting and managerial information. On the one
hand, it is possible to specify accounts for Inventory, Cost of Goods Sold
and Cost Variance and various methods of inventory costing and valuation,
such as standard cost, average cost, user-defined cost, FIFO, LIFO.
On the other hand, the module supports ABC inventory codes and inventory
reorder levels, based on standard formulas. The latter use the information
of quantity on hand, of maximum quantity on hand, quantity on sales order,
quantity on purchase order, and quantity on back order.
The module uses price levels
to identify separate inventory price for retail and wholesale customers.
It is possible to group the items into various classes, and combine unlimited
number of inventory items into kits. Any kit that is a stock item can be
used as component of another kit. Solomon IV generates the item bin labels
to organize inventory storage area.
In addition to multiple
site support, the module provides unit conversions on an inventory item-by-item
basis. It supports various inventory types ( finished goods, component
parts, raw materials, labor overhead, machine overhead ) as well as standard
cost breakout ( current costs versus pending costs and direct costs versus
fixed and variable overhead ). An exchange of information among Inventory
and other modules of the Solomon IV is shown at the Table
4.
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Order Processing
The Order Processing
module is a flexible ordering and invoicing system that manages the process
of fulfilling the orders received by the user's business. The process of
ordering is tightly integrated with Accounts Receivable and Inventory,
and the module automatically checks customer credit limits and inventory
availability. It processes quotation, normal, blanket standard, master,
and drop-ship order types and distinguishes orders and back orders. Orders
are automatically closed by the system when they are completely shipped
and invoiced.
The Order Processing module
track the availability of inventory and can automatically place all or
part of the order to the back order. The option to provide a complete list
of substitute items is also available. This feature allows quickly
meet sales demand without constantly monitoring quantities of items in
hand. The pattern of data exchange of the module with other modules at
the system is displayed at the Table 5. The module
contributes to the benefits of the accounting system through accurate and
consistent computation of Sales, Inventories, and Accounts Receivable
accounts. In addition, the module possesses the capability of automatic
calculation of the Sales and Value Added Taxes.
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Bill of Materials
Whereas the Inventory and
other modules of the system concentrate on inventory control and distribution
(purchasing) operations, the Bill of Materials module of Solomon IV adds
capabilities of manufacturing operations control to the system. It is intended
to the businesses which require primary costing rather than material planning
and capacity scheduling. The module supports standard costing and
product and process definitions using bills and routings.
The user can create individual
bill of material for each site where the item is used as well as the global
bill of material. Each bill can include unlimited number of components
up to 25 levels. The module has the option to apply the overhead to the
material's direct cost and supports standard as well as actual costing.
It is possible to create individual routings with unlimited number of steps
for each site where an inventory item is used. For each step the user can
enter the operation to be performed and the work center where it should
be done.
The module exchanges data
with Inventory and General Ledger modules of the system (Table
6). The whole system benefit from the module through the accurate evaluation
of the Work-in-Process and Finished Goods Inventory and information regarding
the Cost of Goods Sold.
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Purchasing module of the
Solomon IV system allows to maintain consistent relationship between customer's
business and suppliers. It helps to generate detailed purchase orders and
materials/components receipt records.
The module accommodates
regular, standard, blanket, and drop-ship orders. It supports flexible
purchasing receipt processing, allowing to track open orders, receive the
quantity that differs from the originally ordered quantity and overwrite
the unit costs. It gives the opportunity to generate Accounts Payable vouchers
automatically when the purchase order are received. Another capability
of the module is the analysis of the vendor's performance. Performance
measures include:
| Module | Sends | Receives |
| Accounts Payable | Vendor IDs
Addresses Vouchers |
Purchase Terms
Vouchers |
| Bar Coding | Receipts | Receipts |
| Inventory | Quantity on Hand
Inventory Balance |
Quantity on Order |
| Shared Information | Taxes
Contract Terms |
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Bar Coding
The appearance of the bar
coding module in the accounting information system is a step towards integration
of accounting and managerial function itself. Bar code usage becomes the
industry standard in managing inventories in retail. Bar coding module
increase speed, and improve accuracy in shipping, receiving, transferring,
counting of inventory. By using bar coding inventory data entry errors
reduce from 1 error per 300 characters to one in 1,000,000. characters.
The module provides the
opportunity of "paperless" order receipts and shipping and the ability
to manage the warehouse routings, reducing the wasted movement and increasing
the picker's productivity. Other options include the abilities to
program substitutions of the items with immediate check of the substitution
validity at the time when the item is picking up.
Accounting and management
informational systems of the organization are closely connected to each
other, sharing common information as well as updating it. Integration of
accounting and managerial informational systems of the organization contributes
to the benefits of both, providing consistency and integrity of the information
throughout the organization.
The cycle purchasing --
inventory -- sales illustrates the issues of integration more clearly.
Contemporary accounting software, especially horizontal solutions for the
enterprises of a certain class, absorbs functions, that are known as managerial
tasks. Solomon IV is one of the foreword representatives of this class
of software. Integration of accounting and managerial modules of the package
provides information for both, timing and cost aspects of the inventory
management. At the same time, the interaction supplies accounting modules
with consistent information regarding Payables, Receivables and Cost of
Goods Sold.
(1) Courtney H. M., Flippen C. L. "A shopper's guide
to accounting software: fifteen leading accounting high-end packages for
PC are examined." Journal of accountancy, Vol. 179, No 2, Feb. 1995, 37-56.
(2) The Institute of Management and Administration
Rating Report, Issue 96-10A, Oct. 11, 1996.
(3) Stafford, J. "Windows will Prevail (Platinum
Edges Competitors at the Wide-Open Accounting market," VAR Business: Technology
& Business Decisions for Solutions Selling, March 15, 1997.
(4) "How to Choose Accounting Software: An Executive
Guide for Business Managers," SBT Accounting System Preprint, 1996.
(5) "Solomon Software: Features and Benefits Overview,"
Solomon Software Brochure and Multimedia CD, 1996.
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