Avoid GL impact and average cost inaccuracy when using ...

If the Completion quantity is less than the Work Order quantity the result in the ... but was converted to an enhancement (Enhancement #325058) by NetSuite. Home  /  WhatWeOffer  /  TechnologyConsultingServices  /  NetSuiteResourceCenter  /  NetSuiteTips&Tricks Print Share email linkedin facebook twitter AvoidGLimpactandaveragecostinaccuracywhenusingWIPandrouting WIPandRoutingprovidethosewhomanufactureproductstheabilitytotrackandmonitorinventoryandcostsfromsourcingcomponentsthroughthefinalbuildoffinishedgoods.Thereisanexpectationwhenfollowingthebasicpath,WorkOrdertoIssueComponentstoComplete(Build),thatthefinancialimpactwouldaccuratelyaccountfortheCompletiontransaction. TheexpectationismetwhenthecompletedquantityisforthefullquantityontheWorkOrder.IftheCompletionquantityislessthantheWorkOrderquantitytheresultintheGLisnotasmostwouldexpect. Originallytheissuewasreportedandwasfiledasadefect,butwasconvertedtoanenhancement(Enhancement#325058)byNetSuite. ThisarticlewilldemonstratehowtoidentifytheWIPandRoutingconfigurationthatwillallowthisinaccuracyaswelltodeterminehowtomodifyyouroperationstoavoiditentirely. Thesimplebreakdownoftheissue: WidgetCompany AssemblyItem:Widget AssemblyCost:$10.00 WorkOrder(IC1234) BuildQty:200 TotalWOValue:$2000 WorkOrderIssue(IC2345) WorkOrderCompletion–BuildQty=100(IC3456) Aworkorderisbuilttosignifytheintenttoassembleandcomplete200Widgets,andtheoverallvalueoftheWorkOrderwhencompletedis$2,000. FromtheWorkOrderthecomponentsareissued,movingthetotalvalueofthecomponentstoWIPintheGLandtheinventoryquantityisremovedfromOnHand. 100Assembliesarephysicallyassembled,andtoaccountforthisacompletionisenteredfromtheWorkOrderwithzeroscrap. TheValueof100completedWidgetsis$1,000.0 (100X$10.00=$1,000) FromthesavedcompletiontheGLimpactshowsbalancebetweenWIPandFinishedGoodsatanamountof$2000. Nothingwasscrapped,nothingwaslostordamaged,yettheimpactisforthefullWorkOrdervalue,notwhatwascompleted. Inventory:FinishedGoods GLImpact=$2000 Inventory:WIP=$2000 FurtherreviewoftheFinishedGood(Widget)willshowthatthetransactionupdatedtheAverageCostoftheitembasedontheentireworkorderaswell,basedontheGLimpact. StartingAveragecost=$0.00 AverageCostafterpartialcompletion=$20 ($2000/100=$20) ExpectedAverageCost=$10.00 PasttheidentifiedissuewiththeGLandAverageCosttheWorkOrderremainsopenwiththecomponentsfullyconsumed,andasecondarycompletionoftheremainingqtytobuildwillhaveNOGLimpactatall.Itisallowed,theqtyisbuiltandcomponentsconsumedbutthereisnofinancialimpactofthetransaction. WIPCostingSettings/Configuration WIPAverageCostCompletionUnitCostsetting ThisscenarioaboveisonlymetinfullwhentheWIPAverageCostCompletionUnitCostingissetto“OpenWIPAmount”,theGLimpactoftheinitialpartialbuildiscorrectwhensetto“AverageCost”butnotwithoutdownstreameffectswhencompletingthefinalcompletion/s. Thesettingisfoundat:Setup>AccountingPreferences>Items/Transactions>CostAccounting Belowisabreakdownofthesetting,theNetSuitedefinitionsandanadditionalexplanationofthesettingsnotmentionedclearlyinsupportdocumentation.   OpenWIPAmount: “SelectthiscostcalculationmethodforcalculatingthecompletioncostbasedontheOpenWIPamount” Thisstatementisgenerallymisunderstood,andtheassumptionisthatwhatisremovedfromOpenWIPwillbeusedinthecostcalculation,butthestatementisquiteliteral,itusestheFullOpenWIPamounttocalculatecost,asoutlinedabove. AverageCost:  “Selectthiscostcalculationmethodtoseedeviationsbetweentheactualcostofcomponentconsumptionandtheaveragecostofassemblies.Ifthesevariancesarevalid,theyareincorporatedintotheassemblycostusingtheInventoryAdjustmentWorksheet.” Inthisscenario,thedifferencebetweenthefullvalueoftheWorkOrder,andthevalueofthepartialbuildiswrittentoavarianceaccountandnotintofinishedthegood. Itisessentiallywritingoffthecomponentsnotbeingutilizedinthepartialbuild.ThisoptiondoescreatebalanceintheGLandAverageCostbutdoesnotallowforfurthercompletionastheissuedcomponentswerealreadyconsumedbythebuildandthevariance. Ineithercaseistherenosupportforaccurateaccountingofapartialcompletions,100%oftheissuedcomponentryisconsumedineithercase.ItiseitherwrittentothefinishedgoodskewingtheGLandaveragecost,ortoavarianceaccount.Ineithercasetheremainingcomponents,notusedinthebuild,arephysicallyinWIPandlogicallyconsumed. Thework-arounds UtilizetheCompletionwithBackflush UsingtheBackflushoptiononacompletion,simplyput,combinestheIssueandtheCompletionintoasinglestep.Basedonthecasedescribedabove,ifyoucreateaCompletionwithBackflushfor100of200Widgets,NetSuitewillissuecomponentsfor100assembliesandtheGLimpactwillbe$1,000asexpected.Youwillalsobeleftwith100remainingtobuildasexpected. Thedownsidetothiswork-aroundisthatthecomponentsarenotinWIPuntilthecompletionisentered,whichdefiesaportionofthegeneralpurposeofWIPtracking. TheinventorywillremainCommittedbutOnHanduntiltheBackflushoperationistriggeredonthecompletion.InthecaseofthestandardIssueComponents,theinventoryisremovedfromOnHandandisfullyinWIP. ToCreateaWorkOrderCompletionwithBackflush,setthefieldvalueofthe“Backflush”CheckboxfieldtoTrueorChecked: Donotallowpartialcompletions.   IfyoucurrentlyutilizetheissueofcomponentswithpurposeandareyoutrackinginventoryinWIPmetricsforvisibilityanddecisionmaking,thisisnotanoptionforyouandyouroperationalprocessshouldincludeavoidingpartialcompletions.Itmustbeassumedthat100%oftheissuedcomponentswillbeconsumed,youmusteitherComplete100%oftheintendedbuildquantityorenterscraptoaccountforthetruelossofcomponentsintheprocess. ThecombinationofaWorkOrderIssueandpartialcompletionsisnoteffectivefromanaccountingstandpoint.ThebestoptionpresentedistoutilizetheCompletionwithBackflushoptionandacceptthatcomponentinventorywillnotbeissuedintoWIPpriortocompletion.TheuseoftheCompletionwithBackflushistheonlymethodtoallowformultiplepartialcompletionsfromasingleWorkOrderwithouttheaccountingcomplicationsrelatedtotheAverageCostandthevalidityoftheGLimpactinandoutofWIP. 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