Accrued Costs

NewOrganics

I am curious to know how other companies handle accruing for costs in Dynamics NAV 5.0 that have been incurred but you have not received the invoice yet.

We have a lot of freight costs (as well as other costs) that apply to the value of our inventory and we use charge items to apply the cost to the inventory. Many of our freight vendors do not send invoices until the next month and we want to recognize our costs in the same month as the revenue.

Manually accruing (using journal entries) will make the books balance but the margin on the individual transactions will be overstated until the following period when all costs are recognized.

We have had some development created for us by our partner but it's rather complicated and before I go into it I'd like to know how others accrue for costs.

Thank you.

Karenh

A company that I work for has the same issue. Their freight accrual is significant.

We automated it by making an accrual journal entry when the PO qty received is posted for a freight line.

When the qty. is shipped, the accrual account is debited.

There was an initial problem balancing because users were editing the quantity and cost after the receipt, so a different amount was debited from the accrual account. We fixed it by not allowing users to edit lines that have been receipted: users must enter a new adjustment line to correct amounts. Also, we added the ability to unreceipt a resource item.

NewOrganics

Thanks for the reply. It is very interesting. We've never looked into using resource items so I don't know much about them. Are the companies transactions mostly drop shipments where they are billing the freight to the customer as a separate line item on the sales order?

We've done something similar (as far as automating when posting a purchase receipt) except we did it with Charge (Items).

We use charge (items) to apply the cost to inventory and modified it so that posting the purchase receipt of the charge (item) will post expected costs. Posting the purchase invoice of the charge then reversed the expected costs and posts the actual costs.

It sounds very nice but the devil is in the details. We have had a lot of problems when you try to apply the charge (item) to multiple purchase receipts or when you apply the charge (item) to transfer receipts. The accrual is reversed by the purchase invoice of the applied inventory and not the purchase invoice of the charge (item). It's been very complicated to fix both the programming and the data and we're still trying to get our inventory valuation to match the general ledger.

It seems that accruing for cost of goods is a fairly standard accounting function and but, it seems we've been re-creating the wheel with our development. Do most companies simply accrue manually through journal entries and leave the margins on the individual sales transactions understated until the actual invoice is posted?

Thanks again for any opinions offered,
Jeremy