This article will show you how the processes of cost allocation and recouping work in the ERP Module.
Sometimes, users are required to pre-pay shipping, handling, agent fees, etc., before items are received. In these instances, those expenses need to be allocated properly after the items are received as costs on the Purchase Order (P/O) Receive. This guide will show you how that process works.
Closing the P/O Receive
We already know how to create, receive, and close a P/O from the linked guides. This process begins when closing a P/O Receive that requires a recoup of inventory cost. First, go to Purchasing > P/O Receive and search by your preferred parameter to find the P/O Receive you want.
Below is the P/O Receive we will be using for this example. The status is currently in Stock Receive, meaning that it has been received and batch-closed in WMS, but is still open in ERP. You can also see that it has been received in WMS by looking at the Received column.
Change into Edit mode and enter the Vendor Invoice # under the heading Receive P/O List. The Vendor Invoice # can be found on the bill/invoice issued by your vendor. You will also need to enter the Vendor Invoice Date and the A/P Bill Date (the date you want on the A/P bill that this will generate).
Next, click A/P Options up top. This will determine what your A/P Bills will look like (and you want to make sure they contain the necessary costs).
The following menu will appear:
Note: If you entered any shipping, handling, or duty in the P/O Receive Management screen, you will need to enter the vendor information here.
Here are those values on the P/O Receive Management screen:
Here is where you need to enter the Vendor Name, Vendor Invoice #, Vendor Invoice Date, and A/P Bill Date (if there is an amount in any of these columns).
Here's what it looks like filled out:
We are going to add three other amounts. First, let’s say your freight agreement requires you to pre-pay shipping. You will add that A/P Item and use Vendor #: RECOUP. We will set that up as a vendor for you if this is a feature you will be using. The Vendor Invoice # can be left blank if you don't have one. Enter the Amount and toggle “Is Recoup Amount?” to on. The Debit Account name is where the expense goes – in this example, “Cost of goods sold” account. The expense is being reclassified and is going toward the purchase you are making. The Credit Account is where the expense was originally, before being allocated to an order. In this case: “Prepaid expenses.”
Second, let’s say you have already made certain purchases to complete the item in your inventory. For example, a zipper and some buttons. That purchase would be recorded in your Work in Progress (WIP) as an asset. You would enter WIP as the A/P Item, RECOUP as the Vendor #, enter the Vendor Invoice # if you have one, enter the Amount, and toggle “Is Recoup Amount?” to on. The Debit Account name in this instance represents where the asset was waiting to be allocated to – in this example, it would also be “Cost of goods sold.” The Credit Account represents where the cost toward the A/P Invoice is coming from. In this case, the asset was sitting in the “WIP non-inventory” account.
Third, we will add a cost that is not recuperable. Let’s say your shipment arrives at a warehouse halfway between the manufacturer and you. Your own warehouse is full, and you cannot receive it, so you come to an arrangement for the shipment to stay at the halfway-point warehouse an additional week until you have room to receive it. This cost needs to be included in the P/O, but it is not a pre-paid cost. You would enter Extended Storage as the A/P Item, enter the Vendor # (we’ve entered a placeholder below), enter Vendor Invoice #, enter the Amount, and leave “Is Recoup Amount?” toggled to off. There is no need to fill out any other info in that row.
Click OK to save your A/P Options.
Note: It is important to note that if the Vendor # and Vendor Invoice # on one of the lines are the same as the Vendor # and Vendor Invoice # for Shipping, Handling, or Duty (if applicable), the two amounts will be collected into a single new A/P bill.
Note: You can set a default Debit and Credit Account so that if you leave those fields blank, they will automatically populate with your defaults.
Back on the P/O Receive Management screen, go into Close mode. Click Close in the upper right-hand corner.
Warning: You cannot undo this.
The A/P Options menu will appear again - confirm that all of these details look correct, then click OK.
Note: You can do all of the A/P Options work in Close mode if you'd like.
You will see a notification telling you that the P/O Receive has been successfully closed.
A/P Invoice
Now, let's look at our new bills. On the left-hand menu, go to Accounts Payable > A/P Bill Management.
Click Apply. After a couple of moments, your new A/P Bill(s) will appear at the top of the list. From a single P/O Receive, you can see we now have seven distinct A/P Bills: one for the item itself, one for an expense allocation, one for an asset allocation (both recuperable), one for a non-recuperable cost, and one each for shipping, handling, and duty.
Go into each A/P Bill one by one and update the status to ReadyToPost. Click Save.
If the A/P Bill was sent successfully to QuickBooks, a number will appear in the QuickBooks # column. If you don't see it right away, click Apply again.
