Dynamics 365 Business Central: Item Costing, part 1

Dynamics 365 Business Central: Costing, part 1

Hello everyone, we're going to get into costing. Yes, where this will be a series, probably a big series, so we’ve got to do it.

It's Business Central, I know I've got some costing videos on NAV 2017, 2018 and 2016 maybe, but we're going to do it for Business Central. It's going to be similar, so what am I going to attack first (let's keep it simple in the beginning).

We have an item.

This is actually going to be a coffee mug, spring version. Because we're waiting for spring here in New York City. We're going to buy it, so it's going to be put on a purchase order, and we're going to start by receiving it and not invoice it.

In Business Central you can actually receive the product in, so you’ve got the inventory into the warehouse. But you haven't received the invoice yet. So the inventory can start moving around in the warehouse and even be sold. Then the invoice comes in later.

What we want to do is take a look at how that actually posts.

What happens when you receive, not invoice, and then you invoice later?

What do these two steps do? Technically what happens here is that on the item itself when you receive, there is an item ledger entry that gets created. One for the receipt, and it has the document number off the receipt.

Then that item ledger entry is basically telling you the inventory transaction. From a quantity standpoint. What happened to the quantity? Quantity came in.

There's an item ledger entry for that.

What about the value? There will be a cost amount here, how much the value of this item ledger entry is. That’s going to be zero in the beginning when you hit receive, not invoice.

That’s because you haven’t invoiced yet. You don't know the cost. It starts out by being zero and then when you invoice it turns into being 500 (for example). It changes from 0 to 500.

How can it change? Well, we have value entries, remember? Underneath, right here, in the beginning, there's a value entry that has a value of zero for the receipt, and then later when you invoice there's another value entry that gets created for 500.

This cost up here is the sum, and I'm using fancy math signs now, of all of this. Off the value entries, so that’s this. As we know from item charges (if you watch that video).

Let's see how that is in Business Central. Let's check it out.

What we want to do is to receive, not invoice, on an item. Let me go ahead and get into the item list.

We have the spring coffee mug, which I just created. It has no transactions and it's FIFO costing method.

We're going to be exploring FIFO and the inventory posting group is here, resale. We're going to see how that actually posts into the system. I'm just going to close that out and create a purchase order. 

We get in here and create a new purchase order to Fabrikam. I want to post it to today's date so I'm going to put it here. This is 3/15 and it's going to be the spring coffee mug right here.

I want to put it into the main location. We're going to get a hundred pieces in. I'm going to pay five dollars for each and we're just going to receive it, not invoice it.

I can go into post here and hit receive. Hit OK. Now the quantity to receive goes into the quantity received, right here, but quantity to invoice stays. 

I haven't invoiced yet so we have this two-step process.

What happens if I actually just receive it and do not invoice it?

Once the transaction that comes through?

Let's take a look at that. If I go into the items again, and take a look at the item ledger entry for this. Go here and to navigate history entries, ledger entries.

We have a purchase right here and the cost amount on this is coming in at zero because we haven't booked anything. It's just a hundred coming in now.

Go into items, and the spring coffee mug. Then go into navigate, history entries, ledger entries.

We do process, navigate, that's better.

So here we have a posted purchase receipt, item ledger entry, and value entry.

There are no GL entries that got created. Basically, as we received, it did generate inventory but did not post anything to GL.

Let's go ahead and invoice and let's go ahead and get it to the purchaser. Get to the last one which was the one we wanted. We put in the invoice number,and hit post.

You see quantity to invoice right here, is already 100. Just go ahead and post.

Now I'm going to invoice and it should now put in the five hundred dollars. I'll close it out. Go back, go into the items.

Get in to navigate, history entries, ledger entries.

Now we have cost 500. Let's hit process, navigate.

Now actually, and this is interesting, we have these entries now because that's focusing on the receipt and not the invoice.

The invoice is a different document number. If I take out the document number and say find, it wants to find by documents. That's fine.

Let's just get out of it. We scroll into the cost. 

You can see that there are two documents. This is the receipt document.

What we posted first, and this is the invoice document.

I scrolled into the cost or drilled into the cost, and so you can see here the cost is actually posted on the invoice, not on the receipt.

There’s no cost posted on the receipt. Cost is posted on the invoice. 

If I go ahead, and let me see if I can navigate on this one, and I'm in the value entries now. I get the GL entries and I can see how that actually pushed through.

If I click on the GL entries I can see that it's posting 500 onto 2100, which is a render account, probably the AP. 

Then it's hitting asset accounts here, which is inventory, and actually it's going in and out of this here, direct cost.

This is all the same account. There's a reason why it actually generates four entries and this is something that I wanted to get into maybe a little bit in further videos. 

From a simple standpoint, what it's basically doing is posting to AP, 500. This is because we owe the vendor 500, and posting to asset 500, because we have inventory of 500. That does not happen until you actually invoice. Nothing happens when you actually receive and not invoice.

It's important that those are two steps and they actually are visualized here in the value entries.