Inventory Reconciliation in Dynamics AX

Reconciling Inventory is a big pain issue for most organizations on Dynamics AX. Usually, improper set up of Item Groups, Posting of manual journals into inventory accounts, Service items posting to the ledger, and financial dates are some of the reasons why the inventory sub-ledger does not reconcile to the General ledger.
Follow these steps to determine the cause of the variance and enable you take remedial action and ensure Inventory balances:

1. Ensure Inventory has been closed for the period you are reconciling
2. Obtain Trial Balance figures for inventory: General Ledger - Reports - Transactions - Periodic - Trial Balance
3. Review the posting types by account to determine the transaction types posted to the inventory ledgers: General Ledger - Reports - Reconciliation - Inventory - Item Posting by Account
4. Run the ledger transactions list to determine postings not captured by the Item Posting by Account report: General Ledger - Reports - Transactions - Ledger Transaction list
5. Download this report to Excel and auto-filter by posting to ensure that each posting type is captured
6. Postings not captured could include manual journals, service transactions, blank posting type (probably a bug)
7. Obtain the inventory sub-ledger figures from the inventory value by item group report. Tie the financial value of each item group to the Trial Balance: Inventory Management - Reports - Status - Inventory Value - Inventory Value by item group
8. Research the variances
9. Take remedial actions on a case by case basis
10. If you identify manual journal entries into the inventory account, create a reversing journal entry to correct this. In addition, ensure controls around posting to the Inventory account are in place such as using the "locked in journal" functionality in the chart of accounts or setting up validations for posting type also in the chart of accounts.
11. If you identify service transactions in ledger, then the service item is not set up appropriately. You need to finalize all transactions with the service item, create a new service item that is set up with the right item type, inventory model group, item group and dimension group and create a journal entry to reverse the service item posting.
12. Maintain back up of your work for reference to your auditors.
13. You can also run the Inventory Reconciliation Report to assist in your analysis: General Ledger - Reports - Reconciliation - Inventory - Inventory. Click show differences to determine reasons for variance

I have an Excel template which I have designed to properly capture all the details of the inventory reconciliation and would be glad to provide that. Feel free to contact me.

Good luck as you reconcile inventory and let me know if this post has been useful to you!