Inventory, Expected Costs and purchase variance

ahaag

For one of our customers the behavior of Inventory Posting in Dynamics Nav 5.0 doesn’t comply with their expectations.

They are using ‘Expected Cost Posting’ together with Fifo. So when receiving the ordered goods the inventory value is increased. There are no interim inventory accounts used, the posting occurs against the regular inventory accounts. When an purchase order is invoiced, the earlier booking of the receipt is reversed and the actual costs are posted.

The problem occurs in case the suppliers invoices a different amount then was agreed upon in the purchase order. The inventory should be valued against the amount of the purchase order and not the invoiced amount. The difference should be posted to a purchase variance account.
I found a purchase variance account in Nav, but it looks only to used with a standard cost method.
So I have 2 questions regarding the method of expected costs:
1) Can we prevent the reversal posting of the inventory when posting a purchase invoice?
2) Is there a standard way in Nav to post a price difference between the purchase order and invoice as a purchase variance?

Thank you for your help.

ara3n

Not with standard Navision.
It looks like the client is asking for FIFO costing with Standard Costing method features.
I suggest to look at standard Costing Method and see if it fulfills the requirement.
If not, you have to make the modification.

The modification will include
Add a new field to the Item Journal line called "Purchase Variance"
modifying CU 90 to populate the "unit cost"/Amount with "expected Cost" during invoice.
Set interim inventory account to the same account as inventory account

Modify CU 22 and in function ItemValuePosting()
after
InsertValueEntry(GlobalValueEntry,GlobalItemLedgEntry,FALSE);

Add your code to to check

if "Purchase Variance" <> 0 then
  InsertVarValueEntry(GlobalValueEntry,"Purchase Variance","Purchase Variance ACY");

ahaag

The problem is that Nav is already implemented and operational. So in my opinion it is very difficult to change the current inventory costing method is very difficult.
This means only the option of 'customizing' is available.

ara3n

Yes, customization would be the option left.

AdamRoue

You need to talk to the accountant - why have they set the items up as FIFO when they want standard cost functionality. I would not modify the system in anyway without understanding what they want in relation to how the system is configured, sounds to me like these items are FIFO and need to be standard, but that is a different issue really.

hari_hh

Hi!

As I understand,

1.0 Item `X' is received at say 100 LCY
2.0 Due to expected tick, inventory is valued at 100 LCY
3.0 The supplier has changed the rate from PO.
4.0 The billed rate is 110 LCY.
5.0 So the question is whether at invoice level we can change the purchase price.
6.0 NAV allows 5.0
7.0 In this case, reversal will happen at 100 LCY as booked duirng receipt.
7.1 Normal entry will happen at 110 LCY
7.2 Inventory will be valued at 110 LCY only.
7.3 If in the interim, consumption has happenend, the batch ACIE job will correct the same.
8.0 Once ILE is populated, costing method cannot be changed under the same item code.
Hari