Handling Inter-Location Transfers with Additional Costs in Microsoft Dynamics 365 Business Central
Introduction:
In a multi-location business environment, treating each location as a distinct entity can offer clarity in financial reporting and accountability. However, this comes with its own set of challenges, especially when it comes to transferring goods between locations. In this blog, we'll explore how Microsoft Dynamics 365 Business Central (BC) allows for the addition of margins to account for labor or other costs associated with inter-location transfers.
The Challenge:
A client wishes to ensure that when goods are transferred from one location to another within the same company, there's an additional cost applied. This markup represents the labor cost from the original location, essentially treating the transfer as an internal sale.
Solution Overview:
Business Central offers two methods to handle the addition of extra costs to transfer orders: using a purchase invoice with an item charge or through a revaluation journal.
Method 1: Purchase Invoice with Item Charge
- Create a purchase invoice for the receiving location.
- Use the 'Item Charge' functionality to allocate additional costs to the transferred goods.
- When posting the purchase invoice, Business Central increases the inventory value by the amount of the item charge.
Method 2: Revaluation Journal
- After completing the transfer order, use the 'Item Revaluation Journal' to adjust the cost of the transferred items.
- This method is typically used for post-factum adjustments and can cater to various cost changes, including labor or overhead costs.
Detailed Steps:
1. Using Purchase Invoices with Item Charges:
- Navigate to 'Purchase Invoices' and create a new invoice for the receiving location.
- Add the transferred items and apply item charges representing the additional costs.
- Upon posting the invoice, the system will automatically adjust the cost of the inventory to reflect the additional charges.
2. Applying Revaluation Journals:
- Go to 'Inventory Revaluation Journals' and create a new journal entry.
- Select the items transferred and specify the amount to adjust the costs.
- Post the journal to revalue the items in the inventory with the added costs.
Considerations:
- Consistency: Choose a method that provides consistency in cost application across all locations.
- Reporting: Consider the impact on financial reporting. The selected method should provide clear and accurate financial data.
- Costing Method: The chosen strategy should align with the company’s inventory costing method to maintain cost consistency.
Conclusion:
Business Central provides flexible solutions to accommodate the unique requirements of businesses managing multiple locations. By leveraging purchase invoices with item charges or utilizing the revaluation journal, companies can ensure that internal costs associated with labor and transfer activities are accurately reflected in their financials.
