An intensely manual process at the end of each reporting period is the cut off of incoming inventory items. Typically, the cut off requires the manual segregation of all inventory items received after the reporting period, so that they are not included in the ending inventory count.
The cut off process requires that the accounting department coordinate with the receiving department exactly when the cut off will occur, and which receipts are on either side of this threshold. If handled improperly, it can result in an incorrect cost of goods sold figure, for which the expense is too low in one period and too high in the following period (or vice versa).
An alternative to the manual cut off process is to automate it. Doing so means that the receiving staff date and time stamps all receipts in the computer system as items are received, so the system assigns receipts to the correct period. This system works well unless the receiving staff incorrectly enters transactions in the wrong period. To mitigate this issue, consider using bar codes or RFID tags on incoming goods, and having the system automatically scan them at the receiving dock in real time.
This automated system can also be linked to the purchase order database, from which costs can be extracted and matched to the quantities received. The result is an automated report that shows the amount of expense to accrue for received goods, if a supplier invoice has not yet been received.
An automated cut off system is subject to error, so review its results at regular intervals to ensure that it is still operating correctly.