Parts Inventory Variance

it’s time for your annual parts physical inventory; you are told you have a $60,000 Variance. It’s a huge “Shortage”. It reflects the “Pad” or Perpetual Physical Inventory difference or shortage from the GL or General Ledger maintained by the accounting department. With variance (shortage or overage), typically you would look at invoices not-yet-received by the accounting department, open RO or CT (work-in-progress), or parts returned with credit not received by the accounting department. These are the usual suspects.

But it doesn’t end there. We can create operating standards and procedures that would prevent this problem from happening again. There are steps that can be taken (between the parts manager and the accounting department) to address this problem on an on-going basis, instead of waiting to find out you have a huge write-off ( or Overage) at the end of the year.