Accrue item charges

dkgarden

Dear all,

I have a scenario as below that needs some guidance on how to solve it.

we issued PO to purchase goods from oversea. E.g. We purchase 10 items form oversea using navision PO and post receiving and invoice once we get the invoice. However there is some other charges such as port charges that usually we wont know the actual cost. But eventually this cost has to be added to the 10 item equally. The issue here is we usually wont be able to get the port charges vendor invoice on time so we have to accrue this payment until we get the actual invoice but at the same time we have to add the port charges cost to the inventory. As far as i know, if i open a purchase order and the line item is Item charge, even when i do post Received, no G/L entry will happens. My customer actually wanted to add the port charges cost to the inventory immediately but accrue the port charges cost and automatic reverse it out once we post invoice. Any idea how to achieve this ?

Regards,
Dkgarden

ara3n

you have to make a modification. You can't do this with std nav.

rhpnt

Makes no sense. You can't post some costs on prediction just because you didn't receive the invoice yet. What if the "forecasted" costs are wrong? What would you do with the allready sold items that carry that wrong cost with it? Are you going to programm another cost adjusting function?

The problem is common. I believe that the customer needs those costs to calculate the right sales price. A simple solution would be to use the "Indirect Cost %" field in the item card. But if the customer wants to have the exact purchase cost before he sells the item then he/she has no option but to discipline the vendor to send the invoice ASAP.

ara3n

It makes sense. Many companies that deal with freight, have their costing estimated so that they don't see large variances when the actual freight comes in. I've done many modifications to estimate what the freight is at the time of receiving so that when the actual freight comes in it will reverse the estimated and put in the actual freight. This works the same way as expected costing in NAV.

Alex_Chow

This makes sense and is a common request. As ara3n mentioned, you won't be able to accomplish this without doing some modifications.

Microsoft should really look into this and add it as a standard feature.

rhpnt

Alex Chow wrote:

This makes sense and is a common request. As ara3n mentioned, you won't be able to accomplish this without doing some modifications.
Microsoft should really look into this and add it as a standard feature.

It's a common request of customers who are rather changing the ERP system than discipline the vendor. Issuing an invoice is a few seconds worth of work. What should MS in your opinion do? Enable posting of "virtual" or "expected" costs for which you didn't receive an invoice yet? You can do the same now, post some charges for which you don't have an invoice but you expect to get one. :whistle:
I'm getting the feeling that the fact that posting should be done only for issued or received documents is getting lost along the way...

Alex_Chow

We work in different regions, so I'm suspecting that you're not too familiar with how distribution/manufacturers work in the US.

US is a very big country distance wise. In addition, US is the #1 customer for China, which means there are full containers coming in every day and empty containers leaving our ports. There are a ton of customs, docking procedures, 3rd party agents, 3PL, trucking companies, etc that will add cost to the goods that the Americans crave. It takes weeks and sometimes months before goods arrive. So to get through customs, you receive the proforma invoice that only ESTIMATES what your costs will be.

If it's really as simple as "just discipline your vendors", don't you think we would've done it already? In fact, "just discipline your vendors" is one of the 1st things that came out of my mouth when I didn't understand how the whole process works.

None the less, a standard feature should be allowing the user to get an estimated cost per container received that includes additional freight costs. Then allows the item estimated cost to be posted under the expected cost. Then reverse the expected cost when the actual item charge comes in.

We created a process to do this, but it's not very clean...

rhpnt

Alex Chow wrote:

We work in different regions, so I'm suspecting that you're not too familiar with how distribution/manufacturers work in the US.

US is a very big country distance wise. In addition, US is the #1 customer for China, which means there are full containers coming in every day and empty containers leaving our ports. There are a ton of customs, docking procedures, 3rd party agents, 3PL, trucking companies, etc that will add cost to the goods that the Americans crave. It takes weeks and sometimes months before goods arrive. So to get through customs, you receive the proforma invoice that only ESTIMATES what your costs will be.

If it's really as simple as "just discipline your vendors", don't you think we would've done it already? In fact, "just discipline your vendors" is one of the 1st things that came out of my mouth when I didn't understand how the whole process works.

None the less, a standard feature should be allowing the user to get an estimated cost per container received that includes additional freight costs. Then allows the item estimated cost to be posted under the expected cost. Then reverse the expected cost when the actual item charge comes in.

We created a process to do this, but it's not very clean...

There's no difference between the supply chains in the US and the rest of the world. Basically it's a simple chain of events that sadly almost always fails because of some weak links. Looking globally I can't think of a really good reason why a company would or could not issue an invoice when goods leave their warehouse. Or do you? In my country if you don't issue an invoice you don't get the money - simple! So the only good reason for not issuing an invoice would be that you don't need the money!? :-k

I agree that disciplining the vendors is very hard if not the hardest thing to do. That's why it's always easier to change or add a "standard" feature to the ERP. Those late invoices for costs that happened months ago are every bookkeepers, BI's, CFO's and CEO's nightmare. My experience is that they don't want them and will do anything to avoid such medieval doing. That's not why they paid thousands of dollars for an state of the art ERP.

Your proposed "standard" feature is allready in NAV. You can allready post some estimated costs for received goods and cancel them later to post the right ones. The only drawback for the end user is - it has to be done manually.

Alex_Chow

Don't want to start an arguement here. All I can say that business is viewed differently in my eyes than yours. Both you and me are good at what we do and able to get the customer happy for the customers we serve.

rhpnt wrote:

Your proposed "standard" feature is allready in NAV. You can allready post some estimated costs for received goods and cancel them later to post the right ones. The only drawback for the end user is - it has to be done manually.

Yes, manually. Right now, we have the client post the item charge (with a different GPPG), then created a process to post a credit memo on the item charge when the real item charge comes back in. Again... Not clean and creates too much entries.

rhpnt

Alex Chow wrote:

Don't want to start an arguement here. All I can say that business is viewed differently in my eyes than yours. Both you and me are good at what we do and able to get the customer happy for the customers we serve.

Didn't want to argue, just stating my case. All cool... 8)

Regards!

dkgarden

Hi there,

thanks for giving me so much information. Both of you are good...:)...so seems like there is no easy way to capture the item charge cost like normal item.

Hi Alex, is this the way you suggest to ur customer?

e.g.

I have initially post and invoice on 1/9/10 for my 10 items each cost $ 10 total $ 100
Then in 2/9/10, i post another purchase invoice consist of my Freight charges standard cost. Lets said the standard cost for freight charges is $ 20. Then this $20 will be allocated to each item and hence the item will now cost $ 12 per unit.

On 3/9/10, i made a sales of 5 items at $ 20 each. Hence my COGS would be $60 and sales $100.
Then lets said i get the actual freight invoice on 4/9/10. Total cost is $30 instead of $20. So i have to create a Purchase credit memo and get the posted invoice line for the previous posted freight charges, assign back the charges to the previous 10 items? Then i create a new purchase invoice and apportion $ 30 to the previous 10 items hence the cost of the item should be $13 now instaed of $12?Then i have to run Adjust cost item entries? Is this the way? Appreciate you can list down step by step what i need to do.

Regards,
Dkgarden

Alex_Chow

Yep, post the item charge, but have the item charge go to an expect cost account with a dummy vendor. Then post a credit memo when the actual vendor invoice comes in.

dave_kwok

Problem is my finance said they are not allow to use any dummy vendor in system cause for sure auditor will question. Currently besides freight cost, we do have some other charges that we use dummy vendor to increase the item cost such as depreciation cost will be added to the item as well. We have no way to add back the cost to item except using a dummy vendor and item charge. upon that we will debit back the dummy vendor and credit back to accrual.

Alex_Chow

Again, our solution works for our clients. It's not designed to meet all the requirements of every company.

You need to get together with your NSC and figure out what's an acceptable solution for you guys. Or keep bugging Microsoft to include this as a standard feature in future releases.