on 08-31-2013 11:16 AM
I have a scenario,
I am selling Vehicles to Dealers. And Dealers sell to end customers. We send Spare Parts in bulk for around INR 5 millions to Dealers which the dealers have to use for any Repairs and Damage parts reported during the Vehicle Warranty period.
Incase there is any repair for any parts in the vehicle, the customer will come to the dealers. Dealer will replace the Parts if the same is within warranty.
Now, the Dealer has to send to us (Vehicle Company) all the damage parts in bulk. That can be once in a year we will receive all the items which are replaced with new Spare parts that was sent to Dealers.
We have to track every damage parts against the new parts sent to dealers.
Hence, when we sent the spare parts in bulk, we need to track as to how many are sent to the dealers. When the dealers send the damage items we again need to track the returned items against those sent.
Now there will be possibilities of items which are replaced by Dealers but not sent to us yet. Hence we need to keep the dealers as liable for the items which are still lying with them and those new spare parts which are not yet used.
Currently, we are following the process of Warranty sales to Dealers. Process in SD remains same, like VA01, VL02N and VF01.
Dealers Dr. INR 5000000
Warranty Sales Cr. INR 5000000
We have to pay Sales Tax because we are showing this as Sales.
When we receive the Damaged Items from Dealers we get them verified in Service Department and once confirmed that the item was under warranty we post the JV as,
Warranty Cost Dr. INR 4500000
Dealer Cr. INR 4500000
Also we don't reverse the warranty sales INR 5000000, instead process another method by which we receive the Damaged Items from Dealers.
Reason for not reversing the warranty sales is that auditors will ask for the stock which is actually in the form of damaged items which we sell as scrap. We cannot justify this to Auditors.
The remaining which is still due with dealers like INR 5000000 - INR 4500000 = INR 500000 will be adjusted with the bills due from Dealers from normal sales.
Now, the Warranty sales is showing in my Balance Sheet as Revenue, but it is not revenue. Also, we have to pay Sales Tax for the Revenue. Kindly suggest us a process which can handle all these without getting charged with Sales Tax.
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Hi,
We have CS and Warranty process in place. We maintain every vehicle wise warranty and the duration like 6 months to 1000 hours the vehicle is used.
We are using
IE08- Create Installation Form
IW51- Create Warranty Claim
VL01N- PG
VF01- Release with Credit Memo
VF02- Print
However, the process mentioned in the thread is that we are sending the spare parts which will be replaced by dealer if any vehicle is broken down. These spare parts are sent in bulk to Dealers may be for about INR 50 lacs and so, and we track how many items are replaced by dealer and the damaged items are sent back to us.
Now, I want to know how can we manage this process without showing the Spare parts sent to Dealer as Warranty Sales, since we are paying Sales Tax, although in real time these are not sales. Infact these are warranty expenses. And the spare parts are sent to dealer free of cost for the repair purpose. Those which are used will be charged as Warranty Expenses and we want the damage parts to be sent back to us against them.
For Example- If a Carburettor is damaged. Dealer will replace the damage Carburettor with a new one. This new Carburettor was sent by us to dealer. Now after replacement, the dealer should send us the damage Carburettor. Once the damage Carburettor is received by us, we send the item to Service department. Once Service Department verifies that this Item is under warranty, then we make a book entry as
Warranty Expense Dr 3000
Dealer Cr. 3000
Dealer gets credited because, initially Dealer is Debit and Sales is Credit.
The damaged Carburettor is then sold as scrap. We don't keep them in stock.
Likewise whatever damage parts are sent back are be sold as scrap.
The spare parts sent to Dealers are kept on stock with dealers. But our system shows those are sold to dealers.
Kindly suggest an appropriate process. I feel that consignment is also related to sales.
If anybody has some idea how Automobile Companies manage these processes, it will be helpful.
We also need to keep every item wise track as to which item is replaced and replaced damaged part is returned. Currently we are managing this out of SAP. How can we manage this returns against the one sent. The items which are not returned will be shown against the Dealer Debit which will adjusted with the dealers in Future.
Thanks.
Hi,
I have tried your suggestion in my sandbox, however, I don't want the Items which have been used to be treated as Sales. In consignment process, the goods which are sent to the end customer is treated as sales.
I am fine with other solution where the goods are sent to dealers is not considered as sales until they are sold to end customer.
This will help us to keep track of the items sent and utilized. But whether this will help us to track what items reach us after replacement and they are sold as scraps.
Please suggest an appropriate work around.
Hi,
If you look at the Consignment Process, it is exactly what you might want. Of course, you would need to tweak the process and require SD, MM & FI team to work together and come out with a true process solution. Look at it from an Architect point of view and use it creatively.
I am not sure about : IS-Auto, SM/CS - Warranty Process to give you proper inputs for a potential solution. May be you can explore those areas for better solutions if that is what it is.
Coming to my approach however, here are further inputs:
1) In this process, we also need to be able to include Serial # Profile. This will help tracking the part numbers with Serial Numbers. I have not used this feature in conjunction with Consignment, but is it impossible to do ? I dont think so. We will of course know if it works or not unless we try.
Further, could you clarify in these statements:
2) " I don't want the Items which have been used to be treated as Sales ? " What do you mean by this ? Are you talking of the Consignment Issue Process in this case ?? i.e. when the goods leave the dealer to the End Customer as Sales ??
If your answer for the above point is yes, you could work on this to tweak to make it such that these are given free of charge and the postings do not impact this as Sales.
Anyways, to expect a process solution in replies would be a little too much to ask with all the little tweaks.
For starters, you can make a table SOMETHING LIKE THE EXAMPLE GIVEN BELOW. Please do not take this as the actual literal example table and just make entries. This is just an idea for template You have to include more columns like for example Serial # Relevance, Tax Relevance, Etc.
I would encourage you to go into as much detail as possible without people losing you out. Good Process Flow Diagram and explanation in a table format would greatly help.
Process Flow of Goods | Sales Order / Return Process Partner Functions | Delivery Relevant | Goods Issue Relevant | GI Accounting Posting Relevant | Billing | Accounting Posting Relevance | Remarks | ||
---|---|---|---|---|---|---|---|---|---|
From you to Dealer | |||||||||
From Dealer to End Customer | |||||||||
From End Customer to Dealer | |||||||||
From Dealer to You | |||||||||
Once you have this clear, we can look further.
Hope my inputs help you take the process further.
Thanks.
D Sea,
I like the table you have given in your above post!
added: what is the difference between -
GI Accounting Posting Relevant &
Accounting Posting Relevance
Vijay,
Please comment on the below points -
1. The manufacturing company is sending goods to the dealer. Is this a sale?
In other words, is there any billing and accounting document created?
2. When damaged part is sent by the dealer to the company, the company credits the dealer for the same. Is this correct?
3. When does the dealer pay to the manufacturing company?
Message was edited by: T W - added in blue color
Hi TW,
Thanks for your reply.
The fact that we become too verbose, in our problem / issue / process description, than trying to make process flow diagrams and Excel Sheet Templates, creates a lot of confusion. I was just trying to explain that point through that table.
Process Solutions are as much about making clear easily recognizable issue description in points, as about the actual solution.
Coming to your queries, here you go:
GI Accounting Posting:
It is for Financial Accounting Entries when there is actual Goods Issue. In general, this impacts Cost of Goods Sold Account
Accounting Posting Relevance:
It is for Financial Accounting Entries when there is actual Billing. In general, this impacts Revenue Account.
Normally, both of GI and Billing Documents have Accounting Entries made. These could have Financial Impact on the Company P & L [Profit and Loss Account] or Balance Sheet Account. But we do have an option to make this go differently. This is real integration power.
This is very high level stuff I am referring to.
Hope this helps.
Thanks.
Hi Moderators,
I want this discussion to be viewed by FI Forum. Kindly suggest, how I can do the same?
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Hi All,
Can anybody help?
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