1. #AXUGSummit | #INreno15 #AXUGSummit SCM14 - PROCUREMENT: ACCOUNTING CHARGES WITH PRODUCT RECEIPTS IN MICROSOFT DYNAMICS AX Frank Dahl, Microsoft

2. #AXUGSummit | #INreno15  Charges are not accounted as accruals – Inventory valuation is missing charge accrual amounts  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… – Shifting to use standard cost model? – Adding overheads using the costing sheets?  Charges must be accounted as product cost with receipt !!! 2 BACKGROUND

3. #AXUGSummit | #INreno15  Accounting of charges with product receipt – Charges are adding into inventory cost and account with product receipt – Reliable product cost for only received products  Particular useful when – 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 3 WHAT IS ADDRESSED?

4. SETTING IT UP

5. #AXUGSummit | #INreno15  Setting it up 5 DEMO

6. #AXUGSummit | #INreno15  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 6 RECOMMENDED CONFIGURATION

7. #AXUGSummit | #INreno15 7 ACCOUNTING FOR CHARGES Debit: Item Credit: Ledger Debit: Item Credit: Vendor Debit: Ledger Credit: Ledger Debit: Ledger Credit: Vendor

8. SIMPLE CHARGE ALLOCATION

9. #AXUGSummit | #INreno15  Charge amount usually known when creating order  Commonly as an absorption or an ordering fee 9 SIMPLE CHARGE ALLOCATION Debit: Item Credit: Ledger Debit: Item Credit: Vendor Debit: Ledger Credit: Ledger Debit: Ledger Credit: Vendor

10. #AXUGSummit | #INreno15  Simple charge allocation 10 DEMO

11. #AXUGSummit | #INreno15  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 11 SIMPLE CHARGE ALLOCATION

12. BILLED BY VENDOR CHARGES

13. #AXUGSummit | #INreno15  Charge may be estimated when creating order, but revised later by the vendor  Vendor billing commonly seen with transportation cost 13 BILLED BY VENDOR CHARGES Debit: Item Credit: Ledger Debit: Item Credit: Vendor Debit: Ledger Credit: Ledger Debit: Ledger Credit: Vendor

14. #AXUGSummit | #INreno15  Billed by vendor charges 14 DEMO

15. #AXUGSummit | #INreno15  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 15 BILLED BY VENDOR CHARGES

16. CREDITS AND CORRECTIONS

17. #AXUGSummit | #INreno15  Credits and corrections 17 DEMO

18. #AXUGSummit | #INreno15  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 18 CREDITS AND CORRECTIONS

19. SOMETHING MISSING?

20. #AXUGSummit | #INreno15 20 SOMETHING MISSING?

21. #AXUGSummit | #INreno15 21 SUMMARY

22. #AXUGSummit | #INreno15 22 HAVE QUESTIONS?

23. FINAL SLIDE