What is an Exception Report?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 October 2019
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An exception report is a type of summary report that identifies any events that are outside the scope of what is considered a normal range. Reports of this kind are employed in a number of settings, including the process of inventory reconciliation, project management investigation, and even employee assessments. The goal of the report is to identify any factors that are not considered to be within acceptable parameters, making it possible to take actions that help to minimize or eliminate exceptions and increase overall efficiency.

As it relates to inventory reconciliation, the exception report is often essential to the task of identifying differences between a physical inventory and the inventory that is presented in inventory databases. Over time, errors can creep into just about any type of inventory, making it necessary to make adjustments that reflect the actual amount of goods on hand. Doing so not only makes it easier to adjust ordering of new items so that an adequate amount of supplies are kept on hand, but also makes it possible to keep the inventory accurate for the assessing of taxes.


For example, many manufacturing plants maintain what is known as a company store that is responsible for issuing parts and other components necessary to the operation of the machinery on the plant floor. Managers of that store typically conduct what is known as a cycle count, physically inventorying everything from the smallest screw to the high-cost motor components that are used to maintain and repair the production equipment. When it is found that the number of units showing on the inventory database do not match this physical count, an entry is made on an exception report. This makes it possible to go back and determine if a received shipment of that part was not added to the database, or if some disbursements from the physical inventory were not recorded properly. In some cases, the exception report may also spotlight pilfering of supplies, prompting increased security measures that help minimize the loss to the company.

Along with helping to reconcile different types of inventories, an exception report can also be helpful in the task of project management. In this scenario, the report spotlights pending tasks that are still outstanding, even if the projected completion date for that task has passed. By noting the exception, it is possible to revamp the schedule of tasks for the project to compensate for the discrepancy and get the project back on track.

Even in the area of employee assessments, an exception report may be helpful. Here, the idea is to identify any events related to the employee that fall outside the scope of the basic expectations associated with the job position. The exceptions may relate to performance failures or to performance that goes above and beyond the usual job position. For example, the detail of the exception report may indicate the employee needs further training in certain areas, or identify situations in which the employee was able to take on extra duties while a coworker was ill, effectively aiding the business operation to continue with little to no change in productivity. Depending on the nature of the issues documented on the exception report, the employee may be recommended for remedial training, or be presented with a commendation for providing additional services to an employer while still managing his or her assigned duties effectively.


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Post 1

Retailers and major supermarkets combat inventory abnormalities in what is probably the most efficient way possible.

When an item is scanned at the cash register for purchase, that information is placed in the company's inventory database and, in most cases, a new unit is automatically ordered to replace the one that is sold.

This one-for-one system eliminates the need to determine how many of a product should be ordered. Plus, the software can help a company see which products sell best under which circumstances.

Of course, this system can't address all discrepancies. For example, if a customer returns an undamaged item, that item may be put back on the shelf, even though a new one has been ordered.

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