In the second part of this case study on POS data integrity, we will show how variances in data occur in Purchases & Inventory transfers.
1. Purchases: The purchases referred to are Inventory and Non-inventory items like food, beverages, paper items, cleaning supplies and related categories. The item-wise purchase bills are entered manually in the POS by the receiving staff at the store. The accuracy of this data will directly affect closing Inventory and COGS values returned by the POS. The accuracy of this data can be verified by comparing the Purchases data entered in the POS with the bill received from the food vendor which will be considered for payment. Ideally, these two values must be the same, however sometimes that is not the case. In this case of a franchisee of a leading Pizza chain, we noticed that this discrepancy existed and led to wrong calculation of inventory and cost of goods sold in the books of accounts. Huge discrepancies piled up and the client was head over heels.
There can be multiple reasons behind this mismatch. One likely reason is that the POS is not set up properly, which means that the mapping of the items that are being purchased hasn’t been done to the correct purchase account, hence the correct value of the purchase bill is not reflected in the final output. Another probable reason is data entry mistakes by the person who received the goods and entered the purchase invoice in the POS. These sticky issues must be identified as soon as the accountant takes charge and addresses it with certainty. Let us take a look at the example below.
This is the original bill sent by the vendor:
This is the extract from POS
We can see that the purchase data extracted from the POS and the actual invoice is not matching. Even if we exclude non inventory items like computer, cleaning, small wares etc, the total isn’t matching. Therefore, it is important to bring to the record of the management such issues and then proceed with the accounting.
2. Inventory transfers: Inventory transfer is a quite common practice for restaurant chains having multiple outlets located not too far from each other. Ideally, inventory “transferred out” from the transferor store should match with “transferred in” of the transferee store. We can extract this data from the inventory module of the POS. While doing the bookkeeping of a 44-store franchisee of an internationally acclaimed Pizza chain of the US, we encountered this exact issue. The closing inventory for both the stores were now incorrect and had to be normalized by passing an adjustment journal. The reason for this problem could be:
a) One likely reason is that the mapping of the items which are being transferred hasn’t been done to the correct inventory account or hasn’t been mapped at all in either of the store’s POS. Hence the correct value of the transfer is not reflected in the inventory transfer statement.
b) A data entry mistake can also be the cause of this.
The extracts from the transferor and transferee store reports has been shown here to elaborate our case.
The inventory transfers are of two stores 2222 and 1111 date ranging 03/30/2020 to 04/26/2020.
Store no. 2222:
Store number 1111:
It’s quite evident that the Store A transferred inventory to store B six times during that period, however store B recorded only four such transfers. This creates a inventory mismatch.
Based on the examples discussed in these 2 case studies, it is imperative that we perform a diagnostic check of the POS data and report the technical errors to the tech support team and management for corrective action.
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