One of the most controversial questions when running workshops with clients surrounds which costing method will be used for inventory. For users in the finance department, the inventory valuation comprises a large portion of their balance sheet reporting; and if salesperson bonuses are based on sales profitability, it’s very important to them as well.
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.
I was surprised to find this major error in one of our client’s Microsoft Dynamics NAV instance. It came about when they converted an Item from produced to purchased. They changed the replenishment system field from Prod. Order to Purchased. They had left the BOM and routing attached in the BOM and Routing fields on the Item Card in case they ever needed to produce the items in the future.
Costing methods usually differ in the way that they value inventory decreases. But, regardless of what costing type you use, all of them have minimum one common thing. When the quantity on inventory is zero, the inventory value must also be zero. The next common thing is way of the posting all incoming and outgoing entries.
In almost all NAV implementations, we need to configure and use costing (inventory, manufacturing, jobs…). This is one of the main functionalities in all ERP solutions as well as in NAV. Because of that I will prepare the series of costing articles with an overview of the principles used within the costing area.