Financial impacts of changing the vendor/customer group in Dynamics 365 Finance

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Paolo Cecchelli

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In this blog post I will try to cover the topic of the changing of customer and vendor group in Dynamics 365 Finance when there are open invoices. When doing this change in my experience these are the main finance-related topics to think about:

The change in the vendor/customer account group does change the posting of transactions under Inventory management --> Setup --> Posting --> Posting?
The change in the vendor/customer account group does change the account in the customer/vendor posting profile?
Are there open invoices (meaning invoices posted but not yet paid)?

To not overcomplicate things, we will not discuss special situation like the existence of open payment journals, not yet settled bills of exchange, and other variables but also those have to be taken into account when changing the customer/vendor group.
For this blog I will change the customer group of the customer “Forest Wholesales” in USMF Contoso Demo environment from 10 to 20:

The Posting
When we change the customer/vendor group it is possible that the P&L accounts that we hit will be different with the new group. To know that we can have a look at the Posting and see if this is the case. In our example we see that for the revenues the group change affects the revenues:

In this case, if finance needs to have the revenues posted from the beginning of year until today according to the new customer group we can create General journals in order to redistribute the P&L accounts accordingly. For the revenues, we will create a journal as such (be careful about the financial dimensions you want to include that are relevant to the business) to offset all the revenues posted for the customer and bring them on the new account:

This step has to be done for all relevant accounts involved in the posting.

Important Note: be careful when testing to what happens to particular accounts like the “Purchase, accrual”, that is a clearing account that offsets with the invoice something written on the Product Receipt. Usually Dynamics handle these changes correctly (by offsetting the old account instead of the new one and not creating mismatches between clearing accounts but is always good to test) but test them thoroughly.

The customer posting profile
When changing the customer group we can have two situations:

The change in the customer group does not affect the customer posting profile, because the Summary account is the same: in the case below groups 10 and 30 have the same Summary account, therefore a change between them does not impact affect the posting of the Customer balance:

In this case also for open transactions (our last point below) there are not major problems.

The change in the customer group changes the customer posting profile and therefore the Accounts receivable account during invoice posting:

This second case will be discussed in the third and last part of the blog that will discuss the situation of changing the posting profile when we have open transactions (posted but not yet paid invoices).

How to deal with open invoices after customer posting profile change
Now we come to the fun part. First of all let’s point out that Dynamics knows that there was a change in the posting profile, and this can be visible from the following reports:

Customer aging report: here the Customer group is already the new one that was changed on the customer:

Customer balance list report: here if we launch the report selecting the “Main account” we get an idea of what should be the totals on the accounts receivable main account with the change.

Launc form of the Customer balance list report

In fact, and this is the important thing to notice, the balance of the customer(s) for which the customer group was changed is already appearing in the totals related to the new account linked to the posting profile:

But of course if we confront this report with the Trial balance we see a discrepancy, because accounting-wise nothing has been transferred yet in the General Ledger:

As can be seen, the total on account 130100 still represents the total Accounts receivable (see the grand total of the Customer balance list).
So how to go from here on? Well, the temptation would be to just act on the Accounts receivable accounts and debiting the 130100 for 143.673,78 and with those crediting account 133300 in order to align the Trial Balance with the Customer balance. If we do not have any open invoice for the customer(s) or vendor(s) that could indeed be an idea but if we have open transactions not.

To understand why let’s look at an example where I am going to pay an invoice posted with the previous customer group on Forest Wholesales and I will be settling it after changing the customer group.
If we create a simple Customer payment journal, in normal circumstances will do the following postings:

Credit the customer and close the invoice balance on the Accounts payable account;
Debit the Bank account

Example of a normal customer payment posting voucher

However, since in our case the customer changed the group Dynamics “sense” this change and adjusts the settlement to the new Accounts receivable account. Therefore, the posting of the below journal:

Results in the following vouchers: 1 Voucher similar in all to the normal voucher (notice the new Accounts receivable account

Additionally, if we look at the related vouchers we find another voucher that accounts for the change that happened on the customer and automatically credits the old account, debits the new account that then get closed with the above voucher:

It’s more clear if we put all the transactions together (in green the two Accounts receivable that clears out):

Of course this reflects also on the Trial Balance, where now the old account is deducted of 67.814,18 and the new one shows in the Debit and Credit the payment offset by the settlement:

Now is clear why we cannot just debit and credit the two accounts with a GL journal: otherwise every time that an open invoice posted before the change gets settled, the system will deduct the previously-posted account.
The only solution that proved to work in my experience is to do the following steps:

Close all open invoices posted with the old customer group setup;
Reopen the invoices with the new setup.

In this way we achieve two goals:

We close the invoices with the previous setup, so that the system will no more do the settlements between the two accounts;
We bring the remaining balance on the new accounts receivable account.

The only drawback I have found is that of course the posting date will not be the real posting date, and this will reflect on lists like the customer statements.
In order to perform the change we do like this:

Make sure that the group on the customer is put back to the initial one (in our case, group 10):

Open a customer payment journal and settle all open transactions against a clearing account:

As a result the balance was deducted from account 130100 and was put temporarily to account 99999:

Then we change the customer group to 20 and we reimport the invoices, like we were importing the opening balances in a migration. A General journal that does write only on the customer balance and does not post neither sales taxes nor revenues: