How to handle delay in receiving A/P invoice

[former_member370721]

Hi

I issue a PO for goods. Once the parts are arriving a GRPO is issued. So far .. everything is just fine.

Now some of the parts are issued for a production, before the A/P invoice has arrived. Once the A/P invoice arrives, it includes additional cost that updates the item cost. The items issued for production before posting the A/P invoice now are missing the additional cost and therefore the production ends up with a wrong total component cost for the product.

Is there a workaround for this scenario to have correct item cost. Waiting with issuing the items is not really an option since the A/P invoice sometimes is arriving quite late and we need to further process the items before.

Thanks

Franz

[Former Member · Accepted solution]

Hi Franz

There are 2 options as follows:

1. Add the expected value to the Goods Receipt PO for additional costs which will bring the cost closer.

2. Use the material revaluation function to reallocate the costs that are expensed when processing the AP Invoice back to trading stock, using the debit/credit method and setting the offset G/L account.

You will notice that when the AP Invoice is processed, the costs are split based on remaining quantity. For example the Goods Receipt PO was for 100 quantity and when the invoice is posted, the onhand is now 50. The additional cost is split for 50 to trading stock and the other 50 to an expense account. The material revaluation must be against this expense account. This would be the suggested method.

Kind regards

Peter Juby

[former_member370721 · Accepted solution]

Peter,

Thanks for the suggestion.

What if - as in my case - the item has evaluation FIFO? Revaluation is not possible in this case.

Some more details ... maybe you have another suggestion to improve the process:

Actually, the items are external work that is per piece. We have it in BOM's/Production as 1, it then multiplies up with the planned quantity and we can issue PO for this external work with the correct quantitiy, as the supplier as well invoices his work as per piece. I have set up an item that is inventory, sales and purchase, uses issue method Backflush and even uses MRP as planning system to generate order recommendations. I have selected FIFO because the additional cost may vary quite a bit and I wanted to have real, actual cost instead of an average. So far, everything exactly like I want it to be ... except for the before mentioned issue with the cost.

Any further suggestions?

Franz

[former_member583013 · Accepted solution]

Franz,

If you have not completed the Receipt or even if you have completed the Receipt..you may Return the component and Re-issue them and not you will have the updated AP Invoice Cost.

One of the suggestion I have is to use Batches for the Item which involves external work. You could probably use the Production Order number as the batch number. This way you would be able to issue the right Batch to the right Prod Order.

Let me know if this is not in the lines of your business flow.

Suda

[former_member370721 · Accepted solution]

For the Father item, of which these 'pseudo-work' items are part of (child in BOM/production) we already use batches. So, I am (just) a bit familiar with batches.

However, I don't see how this can solve my problem. Could you please enlighten me in some more details?

Thanks

Franz

[former_member583013 · Accepted solution]

I updated my earlier reply. Please take a look at the option of returning component to update the Cost.

[former_member370721 · Accepted solution]

This sounds very promising.

It seems as if this is not possible for items using Backflush, is it?

Franz

[former_member583013 · Accepted solution]

On a backflush Item there is not really a Return Components possible as you are not Issuing anything in the first place.

Suda

[former_member370721]

I have a further question on this topic:

One of the child item (lets name it A )in the Production BOM is of type FIFO. When A was newly created in Item master data and not yet used I could (as expected) not issue a receipt for the production. It throws an error that the cost could not be calculated, which is clear since there is not cost available for one of the child items (A). OK, I added item (A) qty and cost using Goods receipt and then could create the receipt as well as the issue for the production. The production is now closed and stock of the child item A is back to 0.

If i now create a new production with item A as child, it lets me create a receipt and uses the price from the former FIFO layer! If later, after this receipt, item A is added to the stock but with a higher price then it uses the higher price for issuing the item as well as for the rest of the receipts created.

How about the pieces for which a receipt has been created before the Item A was on stock with a valid cost (FIFO)?

They now have the wrong cost which is been shown in the production order as Variance and their cost on stock is wrong as well.

How can I correct this?

Thanks

Franz

Edited by: Franz Leu on Oct 1, 2008 3:44 PM

Edited by: Rui Pereira on Dec 4, 2008 10:37 AM

[Former Member]

Hi Franz

Material revaluation for FIFO is supported in 2007 so I would suggest considering an upgrade.

Kind Regards

Peter Juby

[former_member370721]

Thank you guys.

I am changing the item (act. external work) from backflush to manual and leave the rest of the settings as is. This way I can, just in case its needed, return the item and re-issue with the updated cost. I was not aware of this option.

Best regards,

Franz

[Former Member]

Hi Franz,

Real world is full of compromises. In your case, FIFO method is a proper way for most cases. However, because of FIFO, you have to live with something happend not in according to the right time sequency. Depending on the percentage of Production Order subjected to landing cost addition, you probably need to think outside of the box.

Thanks,

Gordon