Costing and Production Options in Microsoft Dynamics NAV
Microsoft Dynamics NAV can help companies in so many ways: streamlining accounting procedures, simplifying invoicing, and increasing efficiency of supply chain operations to name just a few. However, the software’s effectiveness is only as good as its use. We often find clients who have forgotten to conduct regular processes. While not an ideal situation, there is a solution in most cases. This blog covers options for including costing and production in Dynamics NAV after the software has been implemented and used.
In this instance, there was a client who was not putting their transportation costs into Dynamics NAV. Sometimes they used their own trucks to deliver products, other times they used a third party. But at no time were they inputting that information – and associated cost – into NAV. They were running Dynamics NAV 2016 and hadn’t included any transportation data into the system or “closed” their inventory periods since they went live in 2012.
We did some analysis and determined a three-cost breakout: ranch, processing for sales, and processing for transportation:
- Ranch: farm costs to produce the egg
- Processing for Sales: clean and package eggs, labor, overhead, and (if applicable) cost to move to off-site storage
- Processing for Transportation: sales cost to customer (not 100% if off-site storage cost is included)
Figure 1 - Inventory Setup in Dynamics NAV
As a solution, we developed a three-pronged approach to fill in the gaps created by lack of reporting.
- Transactions are processed with global dimension of Cost Center
- All GL Accounts are used when applicable in the ranch calculation with a filter of global dimension one, called “Cost Center”
At the time of sale, ranch cost is added to the production order. This is done by creating a positive item journal adjust and cost defaulting from the item card to add the egg to the inventory. The cost is set manually based on the ranch calculation from an Excel activity. The business plan then updates the item card cost monthly.
Prior to the time of sale, there are three other options:
- Create a contra account (preferred)
- Create an internal customer to buy and sell from the ranch
- Create a contra account subcontracting to the ranch
As the ranch uses their own vehicles 95% of the time, the transportation cost process is invoiced to an internal vendor via a contra account. Components of the process were comprised of the ranch cost (i.e. the egg), packaging material, and any other raw material/overhead. Following, routing for labor is set up as new and the PRO is closed.
The cost for transportation is built into the price of the item, unless it is not an egg. In that case, it is added to the sales order.
The following is an example of a contra account setup:
Figure 2 - Contra Account Setup in Dynamics NAV step 1 Chart of Accounts
Figure 3 - Contra Account Setup in Dynamics NAV step 2 Vendor Posting Groups
Has your company neglected to capture everything in Dynamics NAV that impacts cost of goods? Are you consistently closing your accounting periods? If you need to improve your business processes and properly capture data in Dynamics NAV, ArcherPoint can help. Please contact us to discuss your needs.
If you have any questions about this process, or if you have some ideas of your own, please comment below. You can also check out more How-To blogs from ArcherPoint.
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