The summary page, as it
actually arrives.

Where it broke

1. Cost landed in the wrong period. Purchase orders were approved after goods were received on 31% of lines sampled, so cost followed the approval date rather than the receipt. Margin was overstated by 1.8 points across the three months tested. $187,000
2. Slow stock carried at full value. $264,590 has not moved in 180 days, with no reserve against it. Two product lines account for 71% of that. $264,000
3. One line valued on a superseded cost. A supplier price change in March was applied going forward but never to stock already on hand. Immaterial, but it recurs

What it means for the decisions in front of you

The inventory figure supporting the facility renewal is 4.6% higher than the position it describes. A lender applying a standard haircut to unverified stock would reach a number close to the restated one, so presenting the restated figure first is the stronger position.

What to do, in order

1. Move the approval step ahead of receipt for the four suppliers involved. One process change, no system work. Stops the recurrence.
2. Reserve against the two slow lines before the next reporting cycle, and decide whether to clear or reprice them.
3. Re-run the valuation once both are done, and take the restated figure into the lender conversation.

The detail behind each finding, the transactions sampled and the method are in the full report. Prepared for the CFO, and not sent to anyone else.