Inventory Optimization Pro Back to Trust the close Book a free 30 minutes

Sample data. No client information appears here.

The business

Wexley Medical, a distributor of medical devices and consumables to hospitals and clinics: infusion sets, patient monitors, syringes, dressings. About $44M in sales, about $6M of inventory, $2.5M of purchases a month from 4 overseas suppliers, and a finance team of 5 closing the month on an accounting system and a separate inventory system.

What was going wrong

The books reconciled every month, and every month it took an inventory adjustment of $14,000 to $28,000 to get there. Some months it added cost, some months it took cost out, and margin moved with it. Each one was under 1% of the month's purchases and over a year they nearly cancelled, so nobody chased them. Nobody could explain them either.

Month-end closeGross marginCost timing

The question it answers

Why does it take an adjustment to close inventory every month, and what is it doing to margin?

12 months of adjustments on one screen, each one opened up into the shipments behind it, with reported margin set against the margin the business actually earned.

It shows the gross, not the net

The adjustments netted to $12,800 for the year, which is why nobody looked. Added up without the signs they were $246,200, about $20,000 a month.

It checks every shipment, not a sample

About 1,200 shipments and 3,600 documents a year. A person samples 25 a month. The AI workflow reads all of them the same way every month, then opens each adjustment into the shipments behind it.

It separates the business from the bookkeeping

Reported margin moved 1.4 points month to month. With cost in the month the goods arrived, it moved 0.3.

It shows the catch, the fix and the result

Where it goes wrong, the 3 moves that fix it, and the first 3 closes after the rule changed, on one page.

Month-end close · 12 months and the 3 after

Where the inventory adjustments came from.

Wexley Medical · January 2025 to March 2026 · US dollars

An inventory adjustment of $14,000 to $28,000, every month. $246,200 in 12 months, on about $2.5M of purchases a month, so each one read as noise. They netted to $12,800 for the year, which is why nobody chased them. $238,600 of it traces to one cause: purchasing, the warehouse and accounting each date the same shipment differently, so cost keeps landing in the wrong month.

1Where it goes wrong53 shipments, each dated 3 waysFound by an AI workflow reading 3 dates on all 1,200 shipments. A person can only compare 2 totals at month-end. 2How to fix itOne dating rule, 2 month-end entriesNo new system, no new people, no change to how the warehouse works. 3The result$20,517 a month down to $433And a margin the CFO can defend, because it stopped moving for no reason.

1Where it goes wrong

Adjustment posted, average month$20,517A different figure every month, $14,300 to $27,600. Net for the year: $12,800.
Traced to shipment timing$238,60097% of the total, across 53 shipments that crossed a month-end.
Reported margin, month to month1.4 ptsBetween 30.5% and 31.9%. The business itself moved 0.3 points.
Shipments behind it53Of about 1,200 in the year. Each crossed a month-end with its dates on different sides.

The adjustment, every month

Plus means extra cost was booked. Minus means cost was taken out. It swings because last month's timing gap reverses while a new one opens.

Extra cost bookedCost taken outAfter the rule

What it did to gross margin

The red line is what the board saw. The black line is the same months with each shipment's cost in the month the goods arrived.

ReportedRestated

Open any month

What made that month's adjustment

Each adjustment is 2 things: last month-end's timing gap reversing, and a new gap opening at this month-end.

ShipmentPurchase order datedGoods receivedSupplier invoiceWhat happenedEffect on the adjustment

The cause

One shipment, 3 calendars

Nothing was miscounted and nothing was missing. Three teams were each right by their own date.

Purchasing

Dates it on the purchase order

Cost is treated as committed the day the order is placed. Weeks before anything arrives.

Warehouse

Dates it on the receipt

Stock on hand goes up the day the goods are checked in. This is when the company owns them.

Accounting

Dates it on the supplier invoice

The inventory account goes up when the invoice is posted. Sometimes before the goods, sometimes 10 days after.

Why it took AI

Where a person cannot reach

53 of about 1,200 shipments. 4% of the shipments caused 97% of the adjustments.

What a person can check

2 totals, once a month

The reconciliation compares the inventory account with the inventory system. When they differ by under 1% of purchases, the affordable move is an adjustment. Checking the 3 dates on every shipment means about 3,600 documents a year from 3 systems. Nobody has those weeks at month-end. The usual test, 25 purchase orders sampled in a month, would be expected to catch 1.

What the AI workflow checks

Every shipment, every month

All 1,200, not a sample. It lines up the 3 dates from the 3 exports, flags each shipment whose dates fall on different sides of a month-end, prices it, and ties the total back to the adjustment that was posted. The same rules every month, so March can be set against June and the pattern shows.

What stays human

The judgment and the rule

Knowing that 3 dates is the place to look. Deciding which date is right: the receipt, when the company owns the goods. Getting purchasing, the warehouse and accounting to work to one rule. That is the advisory work, and AI is what makes the evidence for it affordable.

2How to fix it

CFO action items

3 moves, in order

  1. IssueCost enters the books on the invoice date, not the receipt date.
    Financial impact$246,200 of adjustments in 12 months, and reported margin moving 1.4 points while the business moved 0.3.
    ActionOne rule in all 3 places: cost follows the date the goods are received.
  2. IssueGoods received before the invoice arrive in stock with no cost in the books.
    Financial impactInventory and payables both understated at month-end, then corrected by an adjustment nobody can explain.
    ActionA month-end accrual from the received-not-invoiced list, reversed on the first day of the next month.
  3. IssueInvoices posted before the goods arrive sit in the inventory account.
    Financial impactInventory overstated against the warehouse at month-end, and the difference written to cost.
    ActionPost them to goods in transit until the receipt is recorded.

3The result

12 months before, 3 months after

The adjustment stopped. The margin stopped moving.

The rule took effect on 1 January 2026. These are the first 3 closes under it.

12 months before3 months after
Inventory adjustment, average month$20,517$433
Largest gap between reported and real margin in a month0.75 pts0.02 pts
Shipments with cost in the wrong month530
Adjustments nobody could explain$246,200$0The $1,300 that remains is count differences, each one named.

Margin can be trusted before the next capital commitment, and the month closes without a line nobody can explain.

Basis of preparation. Wexley Medical is a sample company. The figures are illustrative. The pattern comes from a real medical consumables client, where the unexplained adjustments stopped once timing was aligned across purchasing, receiving and accounting, and it is shown here at the size of a larger distributor. No client data appears here. Sales of $43,652,700 for the 12 months, inventory of about $6M, purchases of about $2.5M a month. Margin restated by moving each shipment's cost to the month the goods were received. Adjustments not traced to timing ($7,600) are count differences. Every month's adjustment on this page equals the reversal of the prior month-end gap, plus the new month-end gap, plus the untraced amount.
Book a free 30 minutes

Bring the adjustment nobody can explain. We look at where it comes from.