#AXUGSummit
SCM14 - PROCUREMENT: ACCOUNTING
CHARGES WITH PRODUCT RECEIPTS IN
MICROSOFT DYNAMICS AX
Frank Dahl, Microsoft
#AXUGSummit | #INreno15
BACKGROUND

Charges are not accounted as accruals
–

Businesses suffer loss due to misleading product cost
–
–

Products received not yet invoiced are missing cost from charges
Low product cost result in setting too low price points
Well how about…
–
–

Inventory valuation is missing charge accrual amounts
Shifting to use standard cost model?
Adding overheads using the costing sheets?
Charges must be accounted as product cost with receipt !!!
#AXUGSummit | #INreno15
2
WHAT IS ADDRESSED?

Accounting of charges with product receipt
–
–

Particular useful when
–
–
–

Charges are adding into inventory cost and account with product receipt
Reliable product cost for only received products
Charges constitute a notable part of product cost
For businesses that are margin sensitive
Inventory value is accounted with actual cost like FIFO, LIFO, average
Available as hotfix for both Microsoft Dynamics AX R2 and Microsoft
Dynamics AX R3
–
Enabled through opting in by checking an option in Procurement
parameters
#AXUGSummit | #INreno15
3
SETTING IT UP
DEMO

Setting it up
#AXUGSummit | #INreno15
5
RECOMMENDED CONFIGURATION

To enable
–

Check “Generate charges on product receipt” under Procurement and
sourcing parameters
Considerations
–
–
Relevant in particular with stocked products accounting actual cost like
FIFO, LIFO, average.
Set up accounting that allow reconciliation between inventory and ledger
• Check “Post product receipt in ledger” under Account Payables parameters
• Check “Post physical inventory” and “Post financial inventory” on inventory
model groups
–
–
Review charge codes and consider if accounting should be adjusted
Start adding charges with the new “Proportional” charge category
#AXUGSummit | #INreno15
6
ACCOUNTING FOR CHARGES

#AXUGSummit | #INreno15
Debit: Item
Credit: Ledger
Debit: Item
Credit: Vendor
Debit: Ledger
Credit: Ledger
Debit: Ledger
Credit: Vendor
7
SIMPLE CHARGE ALLOCATION
SIMPLE CHARGE ALLOCATION
Charge amount usually known when creating order
 Commonly as an absorption or an ordering fee

#AXUGSummit | #INreno15
Debit: Item
Credit: Ledger
Debit: Item
Credit: Vendor
Debit: Ledger
Credit: Ledger
Debit: Ledger
Credit: Vendor
9
DEMO

Simple charge allocation
#AXUGSummit | #INreno15
10
SIMPLE CHARGE ALLOCATION

What we saw in the demo
–
–
–

Pcs., Percent, Intercompany percent charges account with Product receipt
New Proportional charges account with Product receipt
Fixed charges only accounts as fully with the first Vendor invoices
Outcomes
–
–
–
Charges can be accounted as inventory cost already with product receipt
Product cost can be accounted as equal for product receipt as vendor
invoice
Product cost becomes more reliable, which improves margins related
decisions
#AXUGSummit | #INreno15
11
BILLED BY VENDOR CHARGES
BILLED BY VENDOR CHARGES
Charge may be estimated when creating order, but revised later by
the vendor
 Vendor billing commonly seen with transportation cost

#AXUGSummit | #INreno15
Debit: Item
Credit: Ledger
Debit: Item
Credit: Vendor
Debit: Ledger
Credit: Ledger
Debit: Ledger
Credit: Vendor
13
DEMO

Billed by vendor charges
#AXUGSummit | #INreno15
14
BILLED BY VENDOR CHARGES

What we saw in the demo
–
–
–

Charges can be changed on the purchase order, and will impact
subsequent receipts and invoices
Proportional charges base on received/invoiced quantity relative to
ordered quantity
Proportional charges remain on the order even when Vendor invoices
override what is charged
Outcomes
–
–
Charges can be estimated first, and later changed as they are known
Product cost is updated by adjusted charged on new receipts and invoice
#AXUGSummit | #INreno15
15
CREDITS AND CORRECTIONS
DEMO

Credits and corrections
#AXUGSummit | #INreno15
17
CREDITS AND CORRECTIONS

What we saw in the demo
–
–
–

Product receipt corrections offset posted charges proportionally
Partial Credit notes of invoices apply partial credit of charges, except
for Fixed
Charges are only accounted on invoice if order lines has negative
quantities
Outcomes
–
–
Corrections and credits also account proportionally as expected
Order lines returning products has product cost provided by the
inventory system
#AXUGSummit | #INreno15
18
SOMETHING MISSING?
SOMETHING MISSING?

–
–
–
Full accrual accounting is not provided with this.
For instance posting of tax is not provided with this.
Purchase orders using “Prices include sales tax” will not post charges
with product receipt
#AXUGSummit | #INreno15
20
SUMMARY

–
–
–
–
Companies characterized by having many products or margin sensitive.
Charges represent a notable part of the overall product cost.
Inventory accounting based on actual cost like FIFO, LIFO or average.
This is commonly seen among retailers.

–
–
–
Install KB 3006787 onto Microsoft Dynamics AX R3 CU8 or Microsoft Dynamics AX R2
CU7. Included in Microsoft Dynamics AX R3 CU9.
Check “Generate charges on product receipt” under Procurement and sourcing
parameters.
Start using the new Proportional charge category

–
–
Charges can be entered as estimates, and later changed all through the invoice
The vendor invoice ultimately determines the final inventory cost accounted
#AXUGSummit | #INreno15
21
HAVE QUESTIONS?


–
Frank Dahl
Senior Program Manager
Email: [email protected]
Microsoft Dynamics AX – SCM R&D
#AXUGSummit | #INreno15
22
FINAL SLIDE