Inventory to be Invoiced

Any inventory item that has been goods receipted essentially creates a liability. Received goods that have not been converted into a creditor yet. When you then create a purchase invoice of this goods receipt, it will move the liability from the Inventory to be Invoiced account into the creditors account. 

Non Inventory to be invoiced

If non inventory items are used in purchase invoice first flow they will not use an Inventory to be Received account and will go directly to the cost of sales account setup on the Item.

However, if a Non-Inventory item is used in a goods receipt first flow it's value will be put into a Non - Inventory to be invoiced account that will then be moved into the creditor when the Purchase Invoice is created from the goods receipt and the cost of this purchase will be put to a cost of sales account on the goods receipt. 

Please note. If this account is not setup, the non-inventory items will post directly to a cost of sales account that is set on the item on the Purchase invoice and will not post any financials on the goods receipt even in goods receipt first flow. If this account is setup and your system is set to active stock mode then it will use this control account to manage your non inventory to be invoiced account on the goods receipt as a future creditor. 

Please note: for both non inventory to be invoiced and Inventory to be received accounts when you debit note the Purchase invoice, the debit note will use the control account used on the purchase invoice. 

Inventory to be Received

This is an account that can be used for purchase invoices that have been created before the goods receipt. You cannot affect stock on the purchase invoice but need to remove an amount out of a transitory account into a stock account when you receive the goods. The system does this automatically for you depending on the flow you have chosen. 

Purchase Price Variance

When the price of goods received (which affects the stock value) is different to what the purchase invoice is, this account is used to post the variance to. This happens often in an import environment where you create a purchase order for some goods at an expected cost. However, as the goods get transported to you, other costs associated with the landed costs of the goods may change from expected to actual. You want to build these costs into the cost of your stock but when you received the stock you never knew what the costs were going to be. This account allows you to manage the variations or deviations of price between goods receipts and the purchase invoices that come in later. 

It is an account that is used automatically when there is a difference in price. 

Once we have developed the landed cost feature set, this section will change quite a bit. For now, we have provided a calculator on the purchase invoice that allows you to insert the paper based invoice you received from your suppliers which may be different to the goods receipt that generated the purchase invoice. You can then enter in the suppliers invoice sub total or line item total and the system will calculate what the line item should be for you. 

Return variance

Return variance is an important account to understand and to manage. Please remember, stock entering your business affects the current weighted average cost of your stock and stock leaving your premises uses the current weighted average cost of your stock. So, if you received stock at a certain value on a particular stock code and the value was 100 (Example, 10 items at the cost of 10). Then you received more of the same item and the total value was 110 (example, 10 items at the cost of 11). Your weighted average of the stock pile for that item will be (110 + 100)/20 or 10.5. So the stock pile weighted average is now valued at 0.5 more than the first grv. If you were to now return the first grv its financial accounts need to be affected accordingly with the extra 0.5 value because you are returning it at the current weighted average of 10.5 and not 10. 

Ignore Delivery/Receipt flag

Please note - should you add a non stocked item to a Purchase Invoice that was created from a goods receipt the financials for this item will simple be debit cost of sales and credit the creditor. We do not create a Non Inventory to be received account to manage this because you will never want to receive that non stocked item that was added to the purchase invoice that came from a goods receipt. Should you do this, please click on the information popup icon on the non stocked item and notice that the Ignore Delivery/receipt flag will be set to Yes. This means that this item, added after the fact will not show on reports that indicate that items are expected to be received. 

These default control accounts should never be journaled to because they are used in the process flow of the system. These accounts are only ever used by the system in the back ground to control timing differences between grv's and purchase invoices. 

Financial Examples

GRV first flow: 

Financial transactions of a GRV and its linked Purchase Invoice financials:

Purchase price variance is an important feature that Augtool handles automatically. Purchase price variance is the difference between the cost allocated to your raw materials or stock on the goods receipt and the actual cost (and what you have to pay) on the Purchase Invoice. Many import companies witness a delay in purchase invoices and the purchase invoice that arrives may be different to the purchase order and goods receipt value. There are various reasons for this including landed costs that are delayed and inflated after the order was made and currency losses and gains to name two. 

The goods receipt pulls through the price from the Purchase Order, or if you create a goods receipt without a Purchase Order you can manually enter (and have to) the value on the goods receipt. This will be the estimate cost of the goods received and will affect your stock value. As soon as you have received your goods, you may sell it the very next moment and not have the sales invoice from your supplier (for you to create your purchase invoice). Should this be different, the Purchase Invoice cannot update the value of the stock because it may have already been sold. Augtool assigns the difference between the goods receipt and the purchase invoice to a purchase price variance account. This account has to be created on your chart of accounts and set under the business unit defaults. Companies manage their purchase price variance account but seeing if it fluctuates around 0 (hopefully). Should the purchase price variance account continue to increase, the company has to write it off to cost of sales. Should you not do this frequently, you will have an over inflated tax bill. 

Should your have a purchase price variance on your Purchase Invoice and then click on the financial transactions icon on the Purchase Invoice the transactions will look like this: 

You will notice above that the linked documents (the Grv in particular) has a stock value of 8000. However, on the purchase invoice at the top, you will notice that the invoice was for 4600. This means that there was a difference (a large one in this case) for 4000 (the 600 is for vat so ignore that for this example).  This 4000 difference is what will post to the purchase Price Variance account as you can see. 

Sometimes what also happens with purchase price variance is that there is a unit difference between the goods receipt and purchase invoice (based on the sales invoice sent by the supplier). You do not want to go change the actual units received because what you received true. You are simply being charged for more or less units by your supplier. 

Calculate function

What normally happens is that you create the purchase invoice and all the items and units and costs gets pulled through to the Purchase Invoice. At this time, you look at your suppliers sales invoice and notice a difference in units or a difference of the subtotal. We have supplied a calculate function on each line item of the Purchase Invoice to insert your expected values in. Once inserting your expected values for either the line item expected total amount or the sub total of the invoice it will calculate the line item price for you. This calculation function is activated by clicking on the calculator icon on the far left of the line item. 

The return variance account is used for differences in cost of the goods you have received at one point in time and then returning it at another point in time.

As you can see above, you received stock at 1000 rand at one point in time and then that stock pile increased in price (drastically in this example) and then by the time you returned it to the customer, the weighted average had to be used to return the goods which was 7809.09. This created a return variance of 6809.09. 

Usually this massive cost variance does not happen but we created this as an example to make the point.  Usually you receive stock at say 100 rand and then over the course of the next week or so you receive the same stock at different prices say 110, 120, 105, 90 which changes the cost of the pile. 

Please remember stock entering the company AFFECTS the cost of the pile. Stock leaving the company always USES the cost of the pile. 

Purchase Invoice first flow

Financial transactions of a Purchase Invoice with its linked Goods Receipt financials. 

You will notice delivery notes debit cost of sales (FP - Fertiliser purchases) and credit stock. The invoice attached then Debits accounts receivable and sales (AR - Accounts Receivable and FS - Fertiliser Bulk Sales). This example also has an attached Customer Return which has credited cost of sales and debited stock again. In this case the user has not credit noted the sales invoice but there are reports that will highlight this for the user. 

Process flow errors and using Override

Should you process a goods receipt and then not process an invoice off the goods receipt but rather do a stand alone purchase invoice and, should you process a purchase invoice and not process a goods receipt off the purchase invoice you will have a process flow financial error. 

The control accounts used in different flows will have a balance that will never be removed or reconciled. If you create a grv on its own, the Inventory to be invoiced account will be used to manage the future creditor and if you create the purchase invoice on its own, the Inventory to be received account will be used to manage future stock to be received. The Stock on the grv will be correct and the creditor on the purchase invoice will be correct but these two accounts will never contra each other out. The goods receipt has an invoice in the system and the invoice has a goods receipt in the system but they do not know about each other. 

In this case you can override each document to a control account that you create on your chart of accounts for example an account called override. 

Override Example

In this case you will see, after overriding the two documents that the summary information, representing its control accounts have been zero'd out and the override account should in this case zero out (override on PI is Debited by 800 and on the goods receipt it is Credited by 800)