Microsoft Dynamics 365 Finance - Purchase Order Landed Cost Receiving Voucher

Hi All,

In this blog post, I would like to share one business requirement for landed cost update in Financials once the shipment will be received in the 3PL warehouse,  I have proposed and configured the solution for Majid Al Futtaim Fashion while performing their Retail track implementation for AX2012 in 2014. 

Here is the business requirement

Business Requirement:

At the time of purchase order creation, the business users are allocating Miscellaneous charges to the purchase order. These charges are for Vendor freight, Insurance, Duty, etc. Once the business user confirms and posts the product receipt for the purchase order these charges should reflect in the Financials (PO receiving the voucher).

Business users also want to allocate these charges automatically once the PO is created for the items. The business has created one matrix with Miscallenous charges details for all the shipments which they are receiving from different suppliers. 

Business Challenges:

• The vendor may not share the purchase invoice once the product receipt is posted, but Freight charges may be applied at the time of receiving the shipment.
• There are a couple of Charges which may not be shared by the vendor at the time of posting the GRN for the shipment.
• Landed costs will be calculated by the system once the shipment received. However, there are other charges allocated once the receiving has been done.
• The business may be required to post charges once the invoice has been posted.
• Mic Charges calculation category "fixed", the system will not calculate the Misc charges at the time of receiving. However, the system will calculate the charges at the time of invoicing. These charges will be reflected in the invoice voucher. 

Proposed Solution:

In order to configure the above scenario.

Firstly, we need to perform some prerequisite setups, make sure that the “Generate Charges on Product Receipt” parameter is enabled. The setup is available in the Procurement and sourcing parameter.

Create Charge Code

The next prerequisite setup is for the charge code. In the charge code form, create the charges for "Vendor Freight".

Make sure to Debit type should be an item as the system will add the cost of freight charges to the item. 

Credit the ledger account and in the accounting field select the GL code. 

Create Purchase order

Create a new purchase order, select vendor, and other related information.

In the purchase order lines, select the line item and the system will automatically populate the default item details. 

In the Action pane "Charges" group select "Maintain charges" as highlighted in the below screenshot.

Purchase Order - Maintain Charges 

In the Charges code form, Create the charge code Vendor Freight. Make sure to select the Category "Percent". This will calculate the landed cost for an item at the time of posting the product receipt. 

Note: It's also possible to maintain and allocate the charges automatically for the PO. Once the line item is selected for the purchase order, the system will automatically maintain and allocate charges for the purchase order lines. 

Purchase Order - Allocate Charges 

Since the charges are maintained, the business user can now allocate the charges as mentioned in the below screenshot. 

Note: If you set up the automatic charges, the system will allocate the charges automatically to all the purchase order lines. 

Once the charges are allocated, you can view the charges in purchase order lines. 

Click Financials> Charges > Maintain charges 

Purchase Order - Accounting Distribution 

The business user can also view the accounting distribution before purchase order confirmation. 

Confirm PO and Post Product Receipt 

In the below screenshot I have posted the purchase order confirmation and product receipt. The PO status is "Received".

Cost Transactions

Once the product receipt is posted we can see that the cost transactions have been updated for the item. 

The item purchase price is 100 USD and the vendor freight charges 10 USD is added to the item. The total item cost is 110 USD. 

Purchase Order - Receiving Voucher

The receiving voucher is showing the Freight 10 USD. The finished good inventory cost is 110 USD.

The accrued purchase amount is 100 USD. 

Purchase Order - Invoice Voucher

Below is the screenshot for invoice voucher. 

Note: Since the Fright services are provided by the third-party vendor. The business user needs to settle the invoice manually for the freight vendor.  

Conclusion & Recommendations 

• If your organization has factored the miscellaneous expenses for the vendor by item then it will be more convenient to use the auto-charge functionality. 
• It's better to factor all your miscellaneous charges by charge code and use the category "percentage" for all the charge codes. This will calculate the landed cost of an item once the purchase order is received. 
• The business user can enter the miscellaneous charges even after posting the GRN. The system will adjust the item cost once you post the purchase invoice. 
• Once you posted the purchase invoice and purchase order status is "Invoiced" then you need to adjust the PO invoice for the miscellaneous charges.
• Make sure to enter and post all the miscellaneous charges for the purchase order and invoice before closing the inventory. 

If you have any feedback feel free to share. 

Cheers

Ali Danish

Dynamics 365 Solution Architect