Preparing Dynamics NAV for a Happy 2016

Before you pop that bottle of champagne to usher in the new year, there are some things we often forget to do that will make returning to work a little easier after the holidays. Making these changes now will mean much smoother sailing into 2016…at least as far as Microsoft Dynamics NAV is concerned.

• Posting Date Controls: Dates that allow users to post transactions to the General Ledger are managed in the General Ledger Setup and User Setup. Often, these dates are not reset at the start of the year, so make sure your users have permissions to post transactions for the new year.
• Update Your Calendar: Now is the time to make sure your 2016 accounting calendar has all the accounting periods for 2016. Are you using Inventory periods or Manufacturing? Make sure these are updated as well.
• Update Your Budget Data: If you use Financial Budgets, they should be updated for the new year as well before you print financial statements containing any budget information.
• Review Your Year-end Closing Process: Most of us only process the year-end close once per year. It is easy to forget the steps involved. Please refer to Laurie O’Brien’s article, “How to Run the Close Year End Process in Microsoft Dynamics NAV 2015” for a refresher on the steps involved.
• Review Your Vendor Setups for 1099 Reporting: Are all of the vendors that require 1099s set up appropriately so you can start capturing this data for 2016? If any forms need to be purchased for these setups, research them as well.
• Be Aware of Posting Dates: NAV has a great feature that allows users to enter 4 digits in a Date field and NAV will automatically default to the current year. So, if you are accustomed to entering 1231 or 12/31, NAV will automatically set it the current year…which will be 2016 on January 1! Unless you’re careful, entries for 12/31/2015 will be posted to 12/31/2016.

BE VERY PARTICULAR THIS TIME OF YEAR TO PREVENT YOUR TRANSACTIONS FROM BEING POSTED TO 12/31/2016.

This is so important…

…that I will say it again.

BE VERY PARTICULAR THIS TIME OF YEAR TO PREVENT YOUR TRANSACTIONS FROM BEING POSTED TO 12/31/2016.

With these pointers in mind, your transition to 2016 should be as painless as possible and should be a Very Happy New Year.

For more information on this or other Microsoft Dynamics NAV topics, please contact ArcherPoint.

Read more "How To" blogs from ArcherPoint for practical advice on using Microsoft Dynamics NAV.

Positively Positive: How to Set Up and Use the Positive Pay Feature in Microsoft Dynamics NAV 2016

Microsoft Dynamics NAV has introduced a new feature in NAV 2016 to help you reduce fraudulent transactions with your bank. This feature is called Positive Pay. In my opinion, it should be called Positively Positive-Positive Pay, as it is both easy to use and can help protect your organization.

Setting up Positive Pay and using it is a relatively easy process. This blog touches on some of the high points of the setup and use of the feature.

Understanding your bank’s requirements

The first step in setting up a Positive Pay feature is to understand your bank’s requirements. Your bank should be helpful in sharing their requirements and explaining the functionality. I also recommend inquiring about the benefits of using Positive Pay. Also be aware that there may be additional fees for using Positive Pay.

Setting up NAV for Positive Pay

Setting up NAV for Positive Pay is relatively easy. You basically decide the format of the files that will be transmitted, assign fields in the files, define the flow of information, and the assign the format to the bank account.

Define the format of the files

NOTE: NAV 2016 comes with two major bank’s file formats predefined. These are Bank of America and Citibank.

Setting up the format is performed from the Departments/Administration/Application Setup/General menu. From this menu, select Data Exchange Definitions.

Figure 1. Navigating to Data Exchange Definitions.

From the list, select the definition that you want to edit, or select New to create a new definition. Verify that the type of data exchange is defined as Type = “Positive Pay Export.”

Figure 2. Creating or editing the definition.

After determining the format of the files generated, you can determine and assign the field that your bank requires. This is performed from the Line Definitions in the Data Exchange Definition page. Select Field Mappings for the portion of the file that you wish to map field to.

Figure 3. Determining and assigning bank-required fields.

Define the flow of information

After determining the format and information that will be contained in the Positive Pay files, you need define the flow of information. This is defined in the Bank Export/Import Setup screen. From the Departments/Administration/Application Setup/General, select Bank Export/Import Setup.

Figure 4. Defining the flow of information.

Hit the New button to insert a New Record. Define a Code, Name, Direction, and Data Exchange Default Code.

Figure 5. Inserting a New Record.

Associate an export format to bank account

After defining the data, you will need to associate an export format to the bank account. On the bank account from which you will be exporting Positive Pay, define the Positive Pay Export Code, located on the Transfer FastTab.

Figure 6. Define the Positive Pay Export Code, located on the Transfer FastTab.

Using Positively Positive-Positive Pay

After performing the setup above, you can start using this great tool. To use it, you need to print some checks. After printing checks, open the Bank Account card and select Positive Pay Export.

Figure 7. Bank Account card, Positive Pay Export.

The Positive Pay export page will indicate the last date you uploaded payments and the details of the payments that have not been transmitted. Hit the Export Button to create the file.

Figure 8. Exporting a file.

When the file is generated, you will be notified. Save the file and transmit to your bank according to their requirements.

Figure 9. Saving the file to transmit to your bank.

Additional features in NAV 2016 Positive Pay

After transmitting the Positive Pay, you can review or re-transmit previously submitted files. This can be performed from the Bank Account card.

Figure 10. Viewing Positive Pay entries.

From the Positive Pay Entries page, you can regenerate the export file, record a Confirmation Number from the bank, and even look at the details from the entry.

Figure 11. Re-exporting Positive Pay to a file.

The setup and use on NAV Positive pay is easy to perform. The benefits of reducing fraud on your bank accounts are great. Using the tool is even easier. That is why I think that this feature should be renamed Dynamics NAV 2016 – Positively Positive-Positive Pay.

If you have questions about this or other new features in Microsoft Dynamics NAV 2016, contact the experts at ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, browse ArcherPoint’s collection of How-To blogs.

Understanding the Interim COGS Account in Microsoft Dynamics NAV

We frequently see NAV Users who have set up their Interim COGS Account incorrectly. This might not have a significant effect in some cases, but in others it can be.

The purpose of the Interim COGS Account is to record inventory value that has shipped but has not been invoiced to the customer. It is a Balance sheet Account, not an Income Statement account, as some would expect.

If your company ships and invoices in a single step, it doesn’t have an effect. But if you ship then wait before invoicing, it can have a major effect. Some exporting companies wait until the goods have arrived at their destination before booking the revenue. During this time, the inventory has left the perpetual inventory but needs to stay on the Balance Sheet until the revenue is recognized.

Figure 1 – General Posting Setup showing Interim COGS Account

For more information on this or any other Dynamics NAV costing topic, please contact ArcherPoint.

If you are interested in NAV development, check out our collection of NAV Development Blogs.

For step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

What Version of Microsoft Dynamics NAV Should I Use for This Database?

Suppose you are walking down the street, a stranger quietly trades briefcases with you, and your new briefcase contains a Microsoft Dynamics NAV database inside of a SQL backup. The stranger slips off into the foggy night. This sort of thing happens to me all of the time, and then I am left with this database that I know nothing about. What version of NAV do I use to access it?

Rather than trying all of the NAV versions you have installed and clicking through all of the “would you like to upgrade” prompts, there is a better way to figure it out using SQL.

You are probably asking yourself, “Why not just ask the customer what version of NAV they are using?” Excellent point, but sometimes they don’t know, or they aren’t specific enough (2009 something). I find I have this issue when we are taking on a new customer that already has NAV installed. They ship us an external disk brick with the database, but we don’t have VPN access yet, so I can’t check the exact build number.

Besides – we get to use SQL to figure it out, and that is cool.

There have been a few blog articles posted about this topic in the past, but most of them were asking if there is a way to downgrade a NAV database after a user accidentally pointed a newer client at that database, and then did an upgrade. I’m not going to talk about forced downgrading, since that is a very bad idea – we’re just going to focus on figuring out which NAV client version you should use.

First, restore the database into SQL.

Using SQL Server Management Studio, open a new query window for this database.

Then run this cool little query:

select [databaseversionno] from [$ndo$dbproperty]

The table $ndo$property has some useful information in it…NONE OF WHICH YOU SHOULD EVER, EVER CHANGE unless you want to quickly and efficiently make NAV not work anymore. I do not know the specifics of what some fields are, like chartable or shadowpwd, but if you have database-specific licensing enabled, this table is where the NAV flf license file is stored.

We are interested in the field [databaseversionno]. This contains and integer that can be mapped to the specific version of NAV client. I do not have a complete list, but I was able to piece this together with some internet searching and by running this query against every database I currently have available. If you know of a version integer that I haven’t listed, please let me know and I’ll update this list. I have not included beta versions.

Table 1. Database version field mapped to NAV version number.

The blog article, Version Check from DynamicsUser.net forums, has lots of detail on the early versions of SQL-capable NAV and what the various database schema changes were.

Wasn’t that a lot simpler that hacking your way through hundreds of NAV client builds until you guessed the correct one? And you got to use your SQL-fu.

If you have any qestions about this topic or other development issues, contact ArcherPoint.

If you are interested in NAV development, check out our collection of NAV Development Blogs.

For step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Set Optional Services in Lanham E-Ship

Options like Saturday Delivery and Signature Required are additional options that can be applied to a main Shipping Agent Service in Lanham’s E-Ship. However, the Shipping Agent Options are specific to the carrier, so FedEx options are different than those for UPS. This blog gives an example of how to set optional services for FedEx.

Optional Services can be set from a couple of places, but our recommendation is to set up separate E-Ship Agent Services and default the Options.

How to set up a FedEx Next Day Saturday Delivery

• From Shipping Agent > E-Ship Agent Service, create a new E-Ship Agent service by copying the Existing FedEx Standard_Overnight to a new service like Standard_Overnight – Saturday (try to go with something shorter). The shipping indicator is the most important piece to ensure is the same/correct. The indicator identifies Overnight.
• From Shipping Agent > E-Ship Agent Service, set Overnight as a default Option on the new Standard_Overnight – Saturday service by putting line focus on the new service and selecting Navigate > Carrier Defaults. Set the Saturday Delivery option on the Delivery Fast Tab.
• If possible, also set other options like delivery signature.
• To test this new setup, on a new or existing order, change the Shipping Agent to FedEx and the E-Ship Agent Service to the new Standard Overnight – Saturday.  Select Navigate > E-Ship > E-Ship Agent Options. The options you set as the default should be reflected here.

NOTE: You can also set these manually on the Order or Package without having to set up a new Service. 

If you have any questions about this or other processes within E-Ship, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

Things to Consider when Setting UP Base Unit of Measure for Item in Microsoft Dynamics NAV

Microsoft Dynamics NAV is very flexible when it comes to setting up Units of Measure for items. But careful consideration should be used before setting up the Base Unit of Measure. Once the Base Unit of Measure is established and there are transactions recorded for the item, the Base Unit of Measure cannot be changed.

When looking at the Quantity on Hand, we see that it is displayed in the Base Unit of Measure. Also, all costing is done in the Base Unit of Measure.

If we look at a Dynamics NAV Item Card, we can see that there three places to enter Units of Measure: Base Unit of Measure, Sales Unit of Measure, and Purchase Unit of Measure. The Sales and Purchase Units of Measure are “defaults” when entering Sales and Purchase Orders and can be changed on the item card.

Figure 1 – There are three places to enter Units of Measure on the Dynamics NAV Item Card: Base Unit of Measure, Sales Unit of Measure, and Purchase Unit of Measure

When we setting up the Base Unit of Measure, we get drop downs to the Unit of Measure Table. The Units of Measure can be whatever you want them to be and there is no list of standard units of measure in Dynamics NAV. You can create units of measure to meet your needs.

Figure 2 - Drop downs to the Unit of Measure Table allow the user to define the Units of Measure as needed

Once the Base Unit of Measure is set up, you can set up alternate units of measure with a conversion factor (Qty. per Unit of Measure). This factor is always related to the Base Unit of Measure whose Qty. per Unit of Measure is always 1.

Figure 3 – Configure alternate units of measure with a conversion factor related to the Base Unit of Measure with Qty. per Unit of Measure of 1

To avoid having decimal quantities of items on hand, always set the Base Unit of Measure to be the smallest unit that the item can be represented. In my example above, EACH would be the smallest and would be set to the Base Unit of Measure.

For more information on this or any other Dynamics NAV costing topic, please contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

Microsoft Dynamics NAV 2016: NAV for Manufacturing Demonstration Video

Microsoft Dynamics NAV 2016 is an ideal ERP solution for manufacturers. It is easy to use, is highly configurable, and contains nearly all the functionality manufacturers need to get up and running quickly.

This short 15-minute video walks through a typical scenario from basic setup to cost calculations to production, including inventory planning and purchase order generation.

A transcript of the video follows below.

You may also find these ArcherPoint blogs helpful...

MRP vs. MPS: What’s the Difference, and When Do You Use Them?
Rick Dill explains MRP (Materials Resource Planning) and MPS (Master Production Schedule) and when to use each.

Phantom Bills of Material in Microsoft Dynamics NAV
ArcherPoint’s costing experts show how to handle a “Phantom” Bill of Material for a part that is never produced on its own, but as part of the final assembly.

Using Alternate Production BOM Versions for Production Orders
ArcherPoint’s costing experts demonstrate how to create and use Alternate BOMs for Production Orders in Microsoft Dynamics NAV.

Which Dynamics NAV Costing Method Should Manufacturers Choose?
This blog discusses the various costing methods available in Microsoft Dynamics NAV with a special focus on manufacturing.

Component Flushing Methods in Microsoft Dynamics NAV
ArcherPoint costing experts discuss component flushing methods in Microsoft Dynamics NAV.

Work Center Units of Measure in Microsoft Dynamics NAV 2013
ArcherPoint’s costing experts show how you can set up a Work Center using various units of measure other than Time Units in Microsoft Dynamics NAV 2013.

Video Transcript

Hello, I’m Bruce Kennedy with ArcherPoint and today I would like to show you the ability of using Manufacturing within the Microsoft Dynamics NAV 2016 application.

We’ll start by looking at the Item Card, which is the detailed information related to the item. In this case I’ll go to the Navigation Pane, click on Items, and I am presented with a list of my items, and we are going to look at the Bicycle today. We’ll look at this in edit mode.

The Bicycle is a manufactured item. I know that by looking at the replenishment tab on the item card. The replenishment system is a production order, as opposed to a purchase order for raw materials or an assembly order which is a non-WIP functionality (i.e., creating items from components).

In addition to the fact that it is a production order, the manufacturing policy is either Make-to-Stock or Make-to-Order. And within the item, since it is manufactured, is a Production Bill of Material and there is also a Route.

Now we can drill down to the actual Bill of Material here or we can go back to the Navigation Pane and use the Product Design in order to look at the Production Bill of Material for the Bicycle. Again, I’ll bring this up in Edit mode.

Here we see two tabs: the General Tab and the Lines.

Within the General Tab, we have a description of the item, the default unit of measure in the production, as well as a status. Statuses must be certified in order to be able to use the production functionality, and you can create the certification by starting off with a new Bill of Material, going Under Development to change the Status (maybe a component is going to be replaced), and then go through the certification which is an internal NAV audit to validate all functions and components within the Bill of Material.

There’s also Version Control within NAV Manufacturing so, as Production Bills of Materials change due to obsolete parts or new components, you are able to maintain a complete history of all of the versions for that Bill of Material.

Within the Lines, we have the different components that are associated with the Bill of Material, and the components are either Items or Production Bills of Material.

The Item can either be a raw material component or it can be a sub-assembled item that has its own Production Order. For example, the front wheel is another produced item composed of spokes, rims, tires, and tubes.

You can also have a Production Bill of Material, more commonly known as a “phantom”. That will actually list the different components within that Production Bill of Material on the end item, in this case, the bicycle.

So, in addition to the type of component it is, the Lines shows you what IS the component, the description, and the quantity associated with that. There’s also a calculation formula that can be used if you have linear dimensions, such as the length, or the length times the width, or the cubic measurement of that, or the weight of the item, so it is dynamic in the structure of the Bill of Material.

In addition to the Unit of Measure associated with that item, there is also a calculation for Scrap. Material Requirement Planning (MRP) will use that Scrap calculation in order to determine the total requirements of that particular item necessary for the production order. In other words, if the normal course of action requires 10% Scrap for a factor, it will generate a 110% requirement when we run Material Requirement Planning.

Materials can be issued to a production order in a number of ways: Manually, a Forward Flush (in other words, when the production order is released to the floor), a Backward Flush (such as, when the production order is finished), or, using the route linking codes, you are able to assign a particular material or materials to be released to the production order at a time that is corresponding to the route itself.

So if I have an Item here, i.e., the front wheel that is to be used in the second stage of my route, I would link a code associated with the front wheel and the second stage on the route, which we will see momentarily.

Let’s go to that route – I’ll exit from here – I’ll go to our routing, and there’s all my routes, and we’ll look at the Bicycle for the route.

Here again we have a General Tab, giving us information about the item, the Type allows me to have either a serial (e.g., one step after the other) or it could also be in parallel (e.g., I have operations 10 and 20 running in parallel going into operation 30). Again the different statuses that we saw in the Bill of Material pertain to the route itself, as well as version controls for the routing.

Now the Lines indicate the different tasks or steps that are going to be used for the production of the item, and the Route is made up of either a Work Center or a Machine Center.

In NAV, a Work Center is a group of machines and/or people. The Machine Center is the individual piece of machinery or an individual themselves. So the Work Center in this case (Work Center 100) is comprised of several pieces of equipment. Let’s drill into that – we’ll go through the Advanced Setup, and, again, we’ll enter this in Edit mode.

So now we’re at the actual Work Center 100, which is the Assembly Department. Let’s expand this window and we’re looking at the tabs of Posting and Scheduling.

Within Posting, what is the Cost associated with this particular Work Center? Here we see we have a Direct Unit Cost of $1.20 per unit, and we’ll get to units momentarily. The Indirect Cost can also be added as a percentage and/or a flat rate, giving us a total unit cost for this operation.

The Unit Cost Calculation is measured either in Units of Time or in Units, such as Hundreds Per Hour. In this case it is measured by Time and that Time is in Minutes. So for every minute, there is a total Unit Cost of $1.20 being associated with the production.

As I said, the Work Centers can be groups of machines or people – here, we see that we have three different machines associated with this assembly department running at an efficiency of 100%. MRP and MPS (Material Resource Planning and Master Production Scheduling) will dictate the amount of time required based on the efficiency as well as the calendar associated with the Work Center. The Calendar is a user-defined operation that dictates the number of shifts, the hours worked within those shifts, and the days of operation, including holidays and weekends. And, again, those are user-defined.

In addition to the setup, there is also the capability of having subcontracted activities. So, for those operations that are performed for an outside vendor, vendors performing their particular service, you can dictate what vendor is associated with that subcontracting activity and, when that operation is met in the production cycle, the system will generate a purchase order for that subcontractor’s service.

Let’s exit from here and go back to our route and we’ll talk about the Setup Time and Other Units of Time. Setup is for the operation to be ready to produce for any number of items that are being generated. In this case, it takes 110 minutes to setup the assembly department whether I’m making one bicycle or many bicycles.

The Run Time, in minutes again, is for each individual bicycle that’s going to be produced. Those two units of time are the only units that are used for calculations of cost. Other times, such as Wait and Move Times, are used by Master Production Scheduling to determine when production orders need to be started to meet customer demands.

You can also have Scrap associated with an operation in addition to the components we saw on the Bill of Material, and the Route Linking Code, again, this matches back to the Bill of Material so that any item on the Bill of Material that has a Route Linking Code of 100 will be released at Operation 10. Any item with a Route Linking Code of 300 on the Bill of Material will be issued to the production order at Operation 40.

Now that we have our Bills of Material and our Routing Steps, any demand and/or requirements based on inventory levels that are preferred by the end user can be used to calculate Production Orders, Purchase Orders, and Transfer Orders all by using the Planning Worksheet.

The Planning Worksheet will help us in calculating what is required to meet inventory levels. When we click the Calculate Plan, we’re given the option of using Master Production Scheduling and/or Material Requirement Planning. Simply indicate the time horizon that you want to plan. You may use a forecast in addition to the actual demand, and then you can use filters to help you in streamlining the operation. Simply say OK and NAV will go out and calculate all demand inventory levels and then generate a suggestion.

Here we see multiple line items in order to produce the bicycle. In addition to the end item, the bicycle itself, which is an MPS order, there are sub-assembled items—the front wheel, the back wheel, the chain assemblies—as well as components, such as the mud guard front and back, that are purchased items with a preferred vendor. This is a worksheet so the end user has the ability to make changes, increase the units, decrease the units, buy a production order item, and any other changes that the end user deems necessary.

Once that is done, you simply Carry Out the Action Message which is to generate the orders. And when those are done, the production orders can be set in either a Planned or Firm Planned status. If there are any Assembly Orders, they can also be generated. And then Purchase Orders can either be created directly or they can be used as a Buyer’s Requisition Worksheet so that a buyer then gets a worksheet to manipulate and generate purchase orders.

If there are any supply chain requirements that have transfer orders supplying one location from another, those transfer orders would also be generated.

Simply say OK, and the system will calculate the requirements and generate all the production orders in the prescribed status, any assembled orders, the purchase orders or the requisition worksheet, and any transfer orders.

As you can see, NAV has a very robust manufacturing solution that allows any individual to be able to generate a produced item within the application.

Thank you very much.

How to Handle Set Up Time with Standard Costs in Microsoft Dynamics NAV

NOTE: This blog applies to any version of Microsoft Dynamics NAV, including NAV 2016. The screenshots are taken from NAV 2013.

To begin a discussion about setting up time with standard costs in Microsoft Dynamics NAV, we must first examine the dilemma of trying to include setup as part of the “Direct” cost of an item.

Setup is a one-time cost; it is not a cost that reoccurs for each piece that is produced. So the question is, how do you split the one-time cost and assign each item that is produced as part of the setup cost?

That is a somewhat rhetorical question. The only way that this can be done is to make an assumption about how many pieces will be run when you set up to run this item. If you always run 100 pieces when you set this item up, for example, then it makes sense to divide the setup time by 100 and assign 1/100th of the setup cost to each item. The problem is, rarely do companies run the exact same quantity each time they setup to run an item up. My guess is that this varies on an order by order basis. 

So let’s take a look at how to handle setup time in NAV when using Standard Cost as the costing method.

There are really two choices for you to consider when you think about including setup time in your cost of the product.

• Include as a “Direct Cost”
• Include as an” Overhead Expense”

There is no right or wrong way to handle setup expenses. It can be included as a Direct Cost, or it could be included as Overhead Expenses. Both are acceptable and provide valid costing based on the assumptions you make. The sections below take each of these options and walks you through how you would use NAV to include the setup costs based on the assumption you move forward with.

Before detailing how to set up the setup costs in NAV, let’s review the circumstances where one option seems to make more sense than the other.

• When using Standard Costing, there is a basic assumption that your costs are predictable and repeatable. This means that your purchase price is fairly consistent, your production process is consistent, and therefore, your costing is consistent. The assumption is that any variance to your production rate and costs are small and therefore recognized as a monthly operating expense rather than the cost of the item.

If your production run size is pretty consistent when you set up to run an item, then using Setup as a direct cost makes sense. This means that the run size difference from order to order is a very small percentage to the size of the production run.

• If the run size varies significantly from order to order, then the base assumption that the cost is predictable is not necessarily valid. Large swings in the run size from order to order mean the setup cost per unit is significantly different and therefore may be more appropriate to consider as an overhead expense. Considering setup as an overhead cost means that you would estimate all the setup costs for the year and then spread all overhead costs over each piece that is made in that work center. By making it a global estimate, the average for all pieces is more accurate than the order by order difference per part.

Setup as Overhead

When applying setup as overhead, two things need to be estimated by work center:

• Total setup costs for the year
• Total production run time for the year

Dividing the total production run time for the year into the total setup costs for the year would calculate the setup cost per hour that should be absorbed with each hour of production through that work center. This rate would then be added to the other overhead expenses that are associated with that work center and included in the cost of the item. This value would be populated in the Overhead Rate field on the Work Center card.

In the example below, the work center is set up to track production in hours. The Overhead Rate field is the amount of overhead expense that is applied for each hour of Run Time on production routings for this Work Center.

Figure 1. Work Center set up to track production in hours.

Overhead Example

Let’s walk through an example of how setup costs would be absorbed as an overhead expense.

In our example, the following conditions are true for our Machining Work Center:

• Production runs 250 days a year
• There is typically 1 setup done per day
• The average setup time at this work center is 30 minutes
• The expected total setup time for the year = 250 * .5 = 125 hours
• The setup hourly wage is $20 per hour
• The total Setup Cost for the work center is 125 Hours * $20 per Hour = $2500
• Production runs 1 shift 6 hours a day (1-hour setup, 1-hour breaks and lunch)
• Total production run time for the year is 250 * 6 = 1500 hours
• Setup Cost per hour of production run time is $2500 / 1500 = $1.66667 per hour

The $1.66667 per hour would be added to the other overhead costs per hour, and loaded into the Overhead Rate field on the work center card.

Setup as a Direct Cost

An average setup cost per unit must be determined if the setup cost will be included as a direct cost of the item. This means that NAV must be able to calculate this average cost per unit. This is done by defining three things:

• Setup Time for an item
• Cost per hour
• “Normal” quantity produced per run

These three important fields are stored in different places in NAV. The sections below define where these key pieces of information are stored.

Setup Time

The setup time is defined on the routing for the item being built. Each routing operation could have a setup time assigned to it.

Figure 2. Setup Time.

Cost per Hour

The cost per hour is the work center cost fields. The value of the cost per hour is determined by the cost fields on the work center. These fields are the:

• Direct Unit Cost
• Indirect Cost %
• Overhead Rate

Figure 3. Work Center card with work center cost fields highlighted.

These fields are totaled in the Unit Cost field. The Unit Cost field is the Cost per Hour (whatever the scheduling unit of measure value is).

Normal Production Run Quantity

The setup cost for a production run must be broken into a cost per unit. This means there must be an assumed quantity that is being produced so that a setup cost can be calculated for each unit produced. This assumed run quantity is stored in the Lot Size field of the item card.

Figure 4: Item Card with Lot Size field highlighted.

To set this value correctly, you will need to study your production run sizes and establish your “Standard Cost Lot Size” for each item. Once established, you would store this value on the NAV Item Card. NAV will then divide this quantity into the Setup Time for each operation to calculate the setup time per item. The per-unit Setup Time costs would then be added to the run time costs to calculate the total labor cost for the operation.

If you study the Detailed Calculation Report for the above item, you will see how the Lot Size is used to calculate Setup Costs per item.

Figure 5. Detailed Calculation report.

Summary

Including setup costs in Standard Costing can be tricky and generate variances on an order by order basis. Including setup time in your direct costs makes sense if your production run size for that item is consistent from order to order.

If your run sizes vary, then it may make more sense to treat setup as an overhead expense and build it into the Overhead Rate associated with the work center.

If you have any questions about this or other processes, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

Other blogs on this topic include:

Rolling Up Standard Costs in Microsoft Dynamics NAV
ArcherPoint’s costing experts show how to use the Standard Cost Worksheet in Microsoft Dynamics NAV as a more reliable method to roll up Standard Costs.

Determine Actual FIFO or LIFO Value of Inventory Using Standard Cost
This blog discusses how to determine actual FIFO or LIFO value of inventory using Standard Cost in Microsoft Dynamics NAV.

Purchases and Direct Cost Applied Accounts in Microsoft Dynamics
This blog discusses Purchases and Direct Cost Applied Accounts and how they are used in Microsoft Dynamics NAV 2013.

Which Dynamics NAV Costing Method Should Manufacturers Choose?
Read about the various costing methods available in Microsoft Dynamics NAV with a special focus on manufacturing.

How to Cycle Count in Microsoft Dynamics NAV, Part 1

This blog walks through the concepts of cycle counting and how to use Microsoft Dynamics NAV to perform cycle counts using the ABC Classification method. Part 2 of this blog series will discuss how to use the physical location method of cycle counting. First, let’s discuss the concepts and philosophy behind cycle counting.

The concepts and philosophy behind cycle counting

Let’s begin by discussing what cycle counting is not: It is NOT a tool to count your way to inventory accuracy. Inventory accuracy is the result of sound inventory processes and procedures. If you have poor processes and procedures, you will always have inaccurate inventory no matter how many times you count it. The real purpose of a good cycle count program is to identify your poor inventory practices so that they can be corrected. Continuously improving inventory practices will lead to continuously more accurate inventory. All warehouse people understand that it is easier to count and reconcile accurate inventory than it is to count inaccurate inventory.

There are two schools of thought when discussing how to perform cycle counting:

• Count by ABC classifications: This method breaks items into categories of importance and count the more important items more frequently.
• Count by location in the warehouse: This method breaks the warehouse into sections, and the counting moves from section to section, and then starts over at the first section again.

Of course, there can be variations to this logic where the warehouse sections have been broken into categories and the A sections counted more frequently than the B and C sections. NAV can easily work with the first two methods of cycle counting. More advanced cycle counting could be done, but the assigning and tracking would need to be done outside of NAV.

This blog discusses how to cycle count in NAV using the ABC Classification method.

ABC Classification

The ABC Classification method breaks your inventory into three groups based on importance. This method is based on the 80/20 rule, assumes that 20% of your items make up the most important items and that a vast majority of your items are not as important. The items are assigned a classification based on the following percentages:

• A = Top 20%
• B = Next 30%
• C = Last 50%

Note that these are general rules and guidelines. The number of categories and the percentage breakdown are business rules that should be set up by each company. The example above is considered typical ABC classification guideline.

The first decision when using category codes is to decide what method you will use to classify your items for counting. There are generally three options that are considered:

• Item Value
• Item Usage
• Frequency of usage

Each of these methods is discussed below:

Item Value:

The item value method bases the importance rating on the value of the item. When using this method, the items are listed in order from the most expensive (per piece) to the least expensive. The top 20% are assigned to the A classification. The B items are the next 30%, with the balance being assigned to the C classification.

Item Usage (Value):

The Item Usage classification is assigned based on the usage of the item during the year. When using this method, the item’s usage is calculated (consumption and shipment) by multiplying the quantity used by the item’s cost. The usage for each item is combined to determine the annual usage for the year.

Finally, each item’s usage is divided by the annual total usage to determine the percent usage for each item for the year. The groups are then assigned a classification based on where they fit in the listing of the highest to lowest usage items.

Similar to Item Value, the ABC classification is assigned using the 20/30/50 percent rule.

Frequency of Use:

The Frequency of Use method assigns importance based on how often an item is used. This is not to be confused with volume of usage; it is how often the item is transacted regardless of volume. Let’s look at an example to make sure this method is clearly understood.

Let’s assume we have two items. During the year, item A had two orders that required 500 pieces each. Item B was on 50 orders, but the total used during the year was only 100 pieces. The frequency of use rule says item B is more important than A because it is used more frequently than A.

To classify items using this method, the “Outbound” transactions need to be counted for each item, and then the items would be listed from most frequently to least frequently transacted items.

The items would then be assigned the ABC classification using the 20/30/50 percent rule.

Setup in NAV

Once the item has been assigned an ABC classification, this classification can be used to assign a count frequency to it. The count frequency rules are an internal business decision, but typically the rules are something like:

• A Items – Count Monthly
• B Items – Count Quarterly
• C Items – Count Annually

The count frequency is assigned on the Item Card (or Stock Keeping Unit Card, but that is a subject of a future blog) in NAV. This value is assigned in the “Phys. Invt. Counting Period Code” field. This field is on the Warehouse tab of the Item Card.

Figure 1. Item Card with “Phys. Invt. Counting Period Code” field highlighted.

NAV lets you make up your own business rules based on how often you want to count each classification. You can name your count periods anything you want. You can call them “A”, “B”, “C”, or “Fast”, “Medium”, “Slow”. The name of the code can be anything you would like it to be. In addition, there is no limit to the number of classifications you create. The classic cycle count logic assumes three classifications, but NAV allows you to create as many count frequencies as you would like to manage.

Below is an example of how to set up the Count Frequency options.

Figure 2. Setting the Phy. Invt. Counting Period Code

In this example, A items will be counted monthly. B items will be counted quarterly, and C items will be counted once a year. Once an item’s classification has been determined, the count frequency code for that item should be assigned on the item card.

NAV assigns the Next Count Starting and Ending dates when the Phy. Invt. Counting Period Code is set. NAV sets the dates based on the count frequency associated with the code that has been assigned.

Figure 3. Item Card with Next Count Starting and Ending Dates fields highlighted.

Now that the next count date range has been assigned, this item will show as an item to count the next time the Cycle Count Selection process is run.

Selecting Parts to Count

• NAV uses the Physical Inventory Journal to generate cycle counts. Open the Physical Inventory Journal and select the Calculate Count Period function on the Action tab.

Figure 4. Phys. Inventory Journal with Calculate Count Period function highlighted on the Action tab.

• Once this option has been selected, NAV will display a page with all the items that need to be counted.
• Select the items you want to include in this count and click the OK button at the bottom of the page.

Figure 5. Selecting items to include in the count.

• This will populate the physical inventory journal with the items that need to be counted.

Figure 6. Physical Inventory Journal with items to be counted.

• Print the count list by clicking on the Print icon on the ribbon.
• A sample of the print is shown below.

Figure 7. Printed count list.

• Once the item has been counted, record the count in the “Qty. (Phy. Inventory)” column as shown below.

Figure 8. Recording the count in the “Qty. (Phy. Inventory)” column.

• NAV calculates the difference between the Quantity Counted and the Quantity on Hand, and populates the “Quantity” field.
• When this is posted, NAV will adjust the inventory, record the date of the count, and set the next count date range. The screen shot below shows an example of the item after it was posted.

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Figure 9. Example of an item after posting.

• Note the new dates on the item card record:
  • Last Phy. Invt. Date field = the date the item was counted.
  • Last Counting Period Update field = the date that the Next Counting period was set. This will usually be the last count date, unless the count frequency has been changed.
  • Next Counting Start Date field = Start date of the period that this item needs to be counted next.
  • Next Counting End Date field = Ending date of the period that this item needs to be counted next.

Remember that the most important part of the cycle count process is to identify why the error exists. Any error should be researched to find out why the error existed. Once the reason is known, you can track the cause of the error and record it in the Reason Code field on the journal line. This will allow you to track the most frequent errors and make procedural changes that will eliminate these errors.

If you have any questions about this blog, contact ArcherPoint. Stay tuned for Part 2 of this series next week.

Related to this topic:

Setting Up Cycle Counting with Warehouse Management in Dynamics NAV

For step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Cycle Count in Microsoft Dynamics NAV, Part 2: Counting by Warehouse Location

In a previous blog, How to Cycle Count in Microsoft Dynamics NAV, Part 1: Counting by ABC Classification, we discussed how to cycle count using Classification codes in Microsoft Dynamics NAV. This blog walks through the cycle count process when using the count by warehouse location and how to use NAV to do so.

To review, cycle counting is NOT a tool to count your way to inventory accuracy. Inventory accuracy is the result of sound inventory processes and procedures. If you have poor processes and procedures, you will always have inaccurate inventory no matter how many times you count it. The real purpose of a good cycle count program is to identify your poor inventory practices so that they can be corrected. Continuously improving inventory practices will lead to continuously more accurate inventory.

There are two approaches to Cycle Counting:

• Count by ABC classifications: This method breaks items into categories of importance and count the more important items more frequently. (Note: this method was discussed in the previous blog).
• Count by location in the warehouse: This method breaks the warehouse into sections, and the counting moves from section to section, and then starts over at the first section again.

Of course, there can be variations to this logic, where the warehouse sections have been broken into categories and the A sections counted more frequently than the B and C sections. NAV can easily work with the first two methods of cycle counting. More advanced cycle counting could be done, but the assigning and tracking would need to be done outside of NAV.

This blog discusses how to cycle count in NAV using the Location in Warehouse method.

Cycle count by location in warehouse

This cycle count method cycles through the warehouse bins by area. The benefit to this approach is that you count all bins and adjust inventory that has been “misplaced.” The ABC Classification method does not find misplaced product as it requires that you count product where the system knows it exists. If an item has been placed in the wrong bin, then cycle counting by classification will not find these errors directly.

The first step when cycle counting by physical location is to break the warehouse into counting sections. There is no specific guidance to this except to make the volume of bins to count achievable in the counting time frame. If bins are counted daily, then the number of bins in the count section must be able to be counted during the daily count period.

The cycle counting process is quite simple in that the bins are selected as filters when the count sheets are created.

Selecting parts to count

• NAV uses the Physical Inventory Journal to generate cycle counts. Open the Physical Inventory Journal and select the Calculate Inventory function on the Action tab.

Figure 1. Physical Inventory Journal with Calculate Inventory function highlighted.

• Once this option has been selected, NAV will display an options selection page.

Figure 2. Options Selections page.

• The user would use the location and bin filter fields to select the bins that are to be counted.
• The journal is populated with items that exist in the bins that were selected.
• In the example below, the location filter was “Silver.” The bin filter was S-01-0001..S-01-0003. Note that the only count lines on the count sheet are within this filter range.

Figure 3. Physical Inventory Journal with location filter.

• Print the count list by clicking on the Print icon on the ribbon.
• A sample of the print is shown below.

Figure 4. Physical Inventory List printout.

• Once the item has been counted, record the count in the “Qty. (Phy. Inventory)” column as shown below.

Figure 5. Recording the count in the “Qty. (Phy. Inventory)” column.

• NAV calculates the difference between the Quantity Counted and the Quantity on Hand, and populates the “Quantity” field.
• When this is posted, NAV will adjust the inventory.

NAV does not track the counting of the bins, as this is a bin property rather than an item card property. This process will work, but the counting by bin range will need to be defined and tracked outside of NAV.

Remember that the most important part of the cycle count process is to identify why the error exists. Any error should be researched to find out why the error existed. Once the reason is known, you can track the cause of the error and record it in the Reason Code field on the journal line. This will allow you to track the most frequent errors and make procedural changes that will eliminate these errors.

If you have any questions about this blog, contact ArcherPoint.

Related to this topic:

Setting Up Cycle Counting with Warehouse Management in Dynamics NAV

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Use Microsoft Dynamics NAV 2016 OCR to Improve Data Entry, Part 1

Microsoft Dynamics NAV 2016 has a new feature that uses OCR technology to help automate the data entry process for vendor invoices. OCR is an acronym for Optical Character Recognition and is defined as "…the mechanical or electronic conversion of images of typed, handwritten or printed text into machine-encoded text".

With this feature, you can take an image of a vendor invoice, send it to a service provider, and then import the invoice back into NAV. This process should save on the time spent performing data entry and reduce keystroking errors.

Microsoft has recently paired up with Lexmark to provide their OCR technology to read images of invoices and import them into Dynamics NAV 2016.

The setup is easy and can be performed in using the following steps:

Registration with Lexmark

• Register the service with Lexmark with the Lexmark Invoice Capture Service for NAV. There, you can set up an account with Lexmark for their OCR services. There a two different plans available, and you will need to decide which is best for your organization.

Perform the Setup in Microsoft Dynamics NAV 2016 for the OCR service

• From the CRONUS USA, Inc./Departments/Administration/IT Administration/Services Menu, select OCR Service Setup

Figure 1. Departments/Administration/IT Administration/Services Menu – OCR Setup.

• On the OCR Service Setup page, select the Set URLs to Default

Figure 2. OCR Service Setup page.

• Enter the User Name, Password, Customer Name and Customer ID (From Lexmark Registration) and click Update OCR Doc. Template List
• Click Test Connection to verify your License and Connection to Lexmark.
• After testing the connection, select the Default OCR Doc. Template form the List of Documents and place a checkmark in the Enabled field.

Figure 3. OCR Service Setup page with Default OCR Doc. Template and Enabled fields highlighted.

You have now completed the setup requirements for using this service.

Part 2 of this blog series will cover using OCR for entering invoices. If you have any questions about using the OCR feature or other questions about Dynamics NAV 2016, contact ArcherPoint.

If you have any questions about this blog, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Use Microsoft Dynamics NAV 2016 OCR to Improve Data Entry, Part 2

Microsoft Dynamics NAV 2016 has a new feature that uses OCR technology to help automate the data entry process for vendor invoices. OCR is an acronym for Optical Character Recognition and is defined as "…the mechanical or electronic conversion of images of typed, handwritten or printed text into machine-encoded text."

In Part 1 of this blog series, I defined how to set up this feature and sign up with Lexmark. In this blog, I will discuss the steps involved in using this new feature in Microsoft Dynamics NAV 2016.

Using the OCR tools are very easy and involves 6 basic steps. They are:

1. Create document
2. Send document to OCR service
3. Receive document from OCR service
4. Correct document as needed
5. Create invoice from document
6. If necessary, review and correct errors in processing and recreate invoice
7. Following is a review of these steps.

Create Document

The first step is to create a document in the Incoming documents area of NAV. This will serve as the area where your OCR Process will begin. From the CRONUS USA, Inc./Departments/Financial Management/General Ledger menu, select Incoming Documents.

Figure 1. CRONUS USA, Inc./Departments/Financial Management/General Ledger menu, Incoming Documents.

Select Create from File to retrieve a scanned document.

Figure 2. Incoming Documents, Create from File.

Select the appropriate scan and click OK to upload it.

Send Document to OCR Service

After creating the incoming document, you can send it to the OCR service for coding. This is performed by clicking the Send to OCR Service button on the Incoming Document page.

Figure 3. Incoming Document, Send to OCR Service.

You will be notified if the File was successfully sent

Now, wait for Lexmark to review the Invoice and Identify the fields needed to process it.

Receive from OCR Service

After the file has been reviewed by the OCR service, the Receive from OCR field will be editable, indicating that it is ready to be received. Click the Receive from OCR Service button to import the document coding.

Figure 4. Receive from OCR Service for importing document coding.

Correct as Needed

If there are any fields that need correction or could not be identified by the OCR service, you can correct them prior to attempting to create the document. This can be performed by clicking Correct OCR Data.

Figure 5. Correct OCR Data.

Record the known information that the OCR service could not provide and click OK. (NOTE: You can review the scanned document by clicking on the Main Attachment for better information.)

Create Invoice from Document

After reviewing the scanned document, you can create the Vendor Invoice from this page by clicking the Create Document button on the Ribbon.

Figure 6. Create Document button on Ribbon.

If there are any errors or warnings on the document, you can correct them by reviewing the Errors and Warnings FastTab and address as needed. After correcting the errors that prevented creation of an Invoice, you can recreate the Invoice by clicking the Create Document button again.

After creating this Vendor Invoice, you can go into the Purchases and Payables area and post the Invoice according to your business processes.

For further information on using this tool, you can review Lexmark’s YouTube video, Lexmark Invoice Capture Service (ICS) for Microsoft Dynamics NAV, or contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Apply Purchase Invoices and Credit Memos in Microsoft Dynamics NAV 2016

Need to apply a Purchase Invoice to a Credit Memo? Let’s walk through how Microsoft Dynamics NAV 2016 handles this process.

First, you will need to open the Vendor Master Record.

Go to Departments > Financial Management > Payables > Vendors

• Select Vendor – Select the Vendor you are wanting to apply one or more entries together. You can open the Vendor Card or highlight the Vendor in the list and then select the Balance under Vendor Statistics.

Figure 1. Vendor List

• Balance – Select the Vendor Balance

Figure 2. Vendor Detail Balance

View – Vendor Ledger Entries – Select the Vendor Ledger Entry you would like to apply entries to.

Figure 3. Vendor Ledger Entries

• Applied Vendor Entries– Select ‘Applied Entries’ in the Tool Bar above. Select the line that you want to Apply and then select the ‘Set Applies-to ID’ in the tool bar at the top. NAV will populate the Login Users ID. Repeat process until all items are applied.
• Review Entries– After selecting all lines that are being applied, notice that the ‘Amount to Apply’ should equal to the amount you are applying.

Figure 4. NAV enters the User ID that is applying the entry.

• Post – Select the Post Application in the Tool Bar above to apply entries.
• Edit – Post Application – NAV will prompt you with a ‘Document No.’ and ‘Posting Date’. The Document No. is the Purchase Invoice you are applying the entry to and the Posting Date of the entry. Select OK to proceed.

Figure 5. Post Application

• After you select OK, A window will pop up a window with the message ‘The application was successfully posted’. Select OK to proceed.

NOTE: Notice that the Credit Memo is no longer in the list.

Figure 6. Balance after posting

• View Applied Entries – Select the Vendor Ledger Entire and then select the ‘Applied Entries’ in the Tool Bar above for review.

Figure 7. Review detailed entries that have been applied.

If you have any questions on this or other features in NAV 2016, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Create Drop Shipments in Microsoft Dynamics NAV 2016

Need to ship an item directly from a vendor to a customer? Let’s walk through how to set up Microsoft Dynamics NAV 2016 to handle this process.

A drop shipment is a shipment of an item or a consignment of items from one of your vendors directly to one of your customers.

NOTE: Before you can use this feature, you must first set up the customer, vendor, and item cards necessary for the order.

Setting up purchasing codes

First you will need to set up your Purchasing Codes with the Drop Shipment field checked. Go to File Departments > Purchase > Administration > Order Processing > Setup > Purchase Codes

Figure 1. Set up Purchasing Codes with Drop Shipment field checked.

Second, you will need to set up you Sales Order Lines to show Purchasing Code and Drop Shipment field. If you do not see Purchasing Code and Drop Shipment field, right-click your mouse to show a list of options. Select the option to Choose Columns…

Figure 2. Show Purchasing Code and Drop Shipment fields.

The Customize Lines window will appear, as shown below. Select the “Purchasing Code” and “Drop Shipment” from the Available Columns on the left side, once you have the field you want highlighted, select the Add button.

Figure 3. Highlight the “Purchasing Code” and “Drop Shipment” and select the Add button.

Creating a drop shipment 

Create a Sales Order: Go to File Departments > Sales & Marketing > Order Processing > Sales Orders

On the sales line, in the Purchasing Code field, select a purchasing code that has a check mark in the Drop Shipment field.

Figure 4. Select the purchasing code for the Drop Shipment.

Create a purchase order to order the corresponding items from your vendor: Go to File Departments > Purchase > Planning > Requisition Worksheets

On the Actions tab, in the Functions group, choose Drop Shipment, and then choose Get Sales Orders.

Figure 5. Choose Get Sales Orderson the Actions tab.

In the Get Sales Order window, fill in the filters to find the relevant sales order.

Figure 6. Fill in the filters in the Get Sales Order window.

Select OK.

Figure 7. Specify an action to take to rebalance the current demand-supply situation.

On the requisition worksheet line, in the Action Message field, NAV defaults to New. This specifies an action to take to rebalance the current demand-supply situation. The value in the field may change after you have calculated a plan and when you edit the quantity or date fields on the planning line. The following action messages exist:

• New – Create a new order
• Change Qty – Change the quantity on an existing order
• Reschedule – Reschedule the due date on an existing order
• Resched. & Chg. Qty. – Reschedule the due date and change the quantity on an existing order
• Cancel – Cancel an existing order

You can define what is included in the batch job by placing a check mark in the Accept Action Message field for the relevant lines. You can also remove the check mark if you want to. The program includes only those lines that have accepted action messages in the batch job.

Figure 8. Accept Action Message

In the Req. Worksheet window, on the Actions tab, in the Functions group, choose Carry Out Action Message.

Figure 9a. Carry Out Action Message

You can also choose to print the order.

Figure 9b. Option to print the order

Select OK.

This carries out the action message that is proposed for the selected line in the Requisition Worksheet window. When the batch job is run, the program carries out the proposed action and changes the existing replenishment plan accordingly. This could result to any or combination of the following:

• The program changes existing replenishment orders according to the action message proposal. This could change the quantity or reschedule the due date.
• The program deletes any existing replenishment orders that carry the action message Cancel.
• The program makes new replenishment orders from proposals that carry the action message New. Note that these orders will not be posted, and you can view them in the relevant application area. You can make changes in the orders.
• The batch job deletes the lines in the requisition worksheet after it has performed the action message. The other lines remain in the requisition worksheet until they are either accepted at a later date or deleted. You can also delete the lines manually.

Select the Print Orders field to print the replenishment orders that are created.

Figure 10. Purchase Order relevant to sales order.

Note: If item tracking was assigned on the corresponding sales order, the Get Sales Order function will also copy the item tracking lines to the newly created purchase order. You can view them from the Lines FastTab by clicking Actions, pointing to Line, and then clicking Item Tracking Lines. You cannot invoice the purchase order before the sales order is invoiced. You cannot post a drop shipment order that has item tracking unless item tracking is synchronized – serial numbers and lot numbers must be the same – between the two orders.

Now the Purchase Order and the Sales Order are linked. The Purchase Order auto populates the Sell-to Customer No., Ship to Name, Address, and Shipment Method Code.

After you have released the purchase order, you must wait until the vendor informs you that the items have been shipped to the customer. You can then post the sales order and thereby post the drop shipment. When you set up the purchase order, use the function Drop Shipment, Get Sales Order to link to the relevant sales order. The sales order lines will be copied to the newly-created purchase order.

Figure 11. Use the function Drop Shipment, Get Sales Order to link to the relevant sales order.

Figure 12. Drop Shipment, Sales Order.

Posting a drop shipment

In the Sales Order window, on the Actions tab, in the Posting group, choose Post, and then choose either Ship to invoice it later or Ship and Invoice to invoice it immediately. If the sales order has been invoiced, you can also invoice the purchase order. It is recommended that you print a Test Report before you post the invoice.

NOTE: When you receive the Items in on the Sales Order, the system will auto receive the Purchase Order Items. You cannot invoice the purchase order before the associated sales order has been invoiced.

Figure 13. Posted Shipment on Sales Order.

Figure 14. Posted Shipment on Purchase Order.

Posting a purchase invoice

The final step is to post the Purchase Invoice:

• Select the Purchase Order (106028) and from the Purchase Order, fill in all the information on the purchase invoice. Note: It is recommended that you print a Test Report before you post the invoice
• Choose Post or Post and Print.
• Choose Invoice and then select OK.

If you have any questions about this or other functions in NAV 2016, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Handle Containers in Microsoft Dynamics NAV

Processing containers using standard Microsoft Dynamics NAV can be a bit cumbersome. However, there are a few tools in NAV that actually makes this easier than most people know. This blog will help you create a process that removes many of the issues that make container management so time consuming.

First, let’s review some of the requirements that make container management challenging and time consuming:

• Container shipments imply ocean shipments, which usually create an accounting requirement to show inventory in transit. This means the inventory must be received to show ownership and placed in transit to a local receiving location.
• To show something in transit, the most logical solution is to create a transfer order to show both ownership and inventory in transit.
• Container shipments many times could include many line items that have been accumulated, but are not yet in transit.
• Container shipments may contain items that were purchased on multiple purchase orders.

To summarize the above requirements, container shipments at best mean that a PO receipt, transfer order, and transfer receipt are required to properly account for the container while it is in transit. The time required to manually add each line item to a large, multi-order container shipment can be time consuming.

The process outlined below is a simple trick that nearly eliminates the duplicate effort required to create a transfer order to create and ship a container.

The tools we will user are basic standard NAV warehouse tools. We will use Bin Mandatory and the Receive function. The Receive function is not required, but for multiple order containers it is easiest if we use the Warehouse Receive function.

Follow the steps below to process your next container shipment.

• Create an offshore location to receive product from your vendor at this overseas location.
• Turn on the following features in the warehouse setup:
  • Bin Mandatory = Yes (this will allow us to receive product in a container into a specific bin)
  • Require Receive = Yes (This will allow us to use the warehouse receive function). NOTE: We will not set up a default receiving bin as we will want to put all items in a container into a unique bin for that container.

Figure 1. Location Card – OVERSEAS – Bin Selection.

• Create a new Bin Code when the vendor notifies you that a container has been or will be loaded. NOTE: I like to create a Bin Code that is equal to the container number so that the bin and container number match.

Figure 2. Creating a new bin code.

• Create a Warehouse receipt when the vendor advises you of what product has been received or loaded into the container.

Figure 3. Warehouse receipt.

• Set the Bin Code = Container Bin Code that was just created.
• Use either the Get Source Documents or the “Use Filters to get Source Documents” to bring the product to be received into the warehouse receipt.

Figure 4. Bring product into the warehouse receipt.

• Delete any lines that are on the order but will not be included in the container.
• Enter the container quantity in the “Quantity to Handle” field of the warehouse receipt.

NOTE: We now have a warehouse receipt that has only the items in the container and the correct quantity.

Figure 5. Enter the quantity of the items in the container.

• Post the receipt as vendor ships the goods (or as they deliver to the port if the ownership takes place as the products are received at the dock).
• When the container ships, all items and quantity from the container should have been received into the container bin.

NOTE: The receipt should now be deleted so that the balance of the quantities not received are available for a future container receipt.

• Now create the transfer to reflect the container is on the water and in transit.
  • The “From Location” should be the overseas receiving location.
  • The “To Location” should be the local receiving location.
  • These two locations should be mapped so that an “In Transit Location” automatically populates.

Figure 6. Completing the Transfer Order.

• Use the Line Function “Get Bin” function to pull all lines from the container specific bin into the transfer order.

Figure 7. The Get Bin function will pull all lines into the transfer order.

Figure 8. Posting the Transfer Order.

• Post the Transfer Order Shipment.

We now have a transfer order specific to that container in transit and ready to be received. All inventory that is in the container was populated, shipped and received in three simple clicks:

• Get Bin Contents
• Posts Shipment
• Post Receipt

As I initially mentioned, with little effort, the challenges with container management can be greatly simplified using this little known trick. The accounting control can be maintained with little effort to show the inventory in transit. The fact that the container has multiple products from multiple purchase orders is simplified by using the Warehouse Receipt functionality. Using this makes it simple to get the product in one bin, which makes it easy to create the transfer order.

I hope you find using this simple trick a great time saver when processing your next container shipment.

If you have any questions on this function or other NAV questions, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

Another Cool Microsoft Dynamics NAV 2016 Feature - Currency Exchange Rates Updates

Microsoft Dynamics NAV 2016 has a built-in tool that helps users update currency exchange rates. This new tool will allow you to use a service to get the latest update exchange rates. This can offer considerable time savings if you need to enter multiple exchange rates, and it will also assist you in keeping your transactions valued properly.

To see how this works, open the currencies from the “CRONUS USA, Inc./Departments/Financial Management/Periodic Activities/Currency/Currencies” menu in NAV2016.

Figure 1. CRONUS USA, Inc./Departments/Financial Management/Periodic Activities/Currency/Currencies menu

On the Currencies page, you will see all of the features that we have come to know and use regularly, like the Exchange rate history (Exchange Rates) and The Adjust exchange rates feature, which adjusts your balance to match the current exchange rates. But the new feature we’re discussing in this blog is called Update Exchange Rates.

Figure 2. Update Exchange Rates feature.

The Update Exchange Rates feature will open up and automatically review your exchange Rates, compare them to the current exchange rates (using a service that you trust), and update your exchange rate to match.

This feature can also be automated using a Job Queue to automatically update your exchange rates.

Currency Exchange Rate Services

The functions for setting up the feature and setting up the Job Queue are easily accessed from the Exchange Rate Services button on the Currency page as well. You can also access the “Currency Exchange Rate Services” from the CRONUS USA, Inc./Departments/Administration/IT Administration/Services menu.

Figure 3. CRONUS USA, Inc./Departments/Administration/IT Administration/Services menu

On the Currency Exch. Rate card, you can specify the URL for the service that you will be using. In addition to the service, you can map fields from the service to the NAV fields in the Field Mapping FastTab.

To validate your setup and see the effect of it, you can click on the Preview button. NOTE: This preview will show the effects of your setup, but will not actually perform the update to your currency exchange rates.

Figure 4. Validate your setup and see the effect of it using the Preview button.

From the Currency Exch. Rate Service card, you can also set the update as a Scheduled task in your NAV Job Queue.

Figure 5. Set the update as a Scheduled task in your NAV Job Queue.

For More information about this feature and the setup requirements, contact Archerpoint……..

If you have any questions on this function or other NAV questions, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Use CASE as the UOM in the Item Card in Microsoft Dynamics NAV 2015

As a standard function in Microsoft Dynamics NAV 2015, the Selling Unit of Measure on the Item Card will determine the quantity of the individual component items produced and included in that UOM sold on the Sales Order Line. In some applications, the use of CASE as the UOM throughout the process is all that is required for production output, when the component items are all consumed in that CASE output. Here is a simple example of the process.

Set up an Item Card with the UOM of CASE, selling UOM of CASE also:

Figure 1. Item Card set up with the Base UOM of CASE.

Figure 2. Item Card set up with the Sales UOM of CASE.

Next, set up an Item Card for the component (could be a raw material):

Figure 3. Item Card set up for a component.

Set up a BOM and attach it to the CASEUOMTEST Item Card. Don’t forget that we will be producing in CASE quantities.

Figure 4. BOM, attached to the CASEUOMTEST Item Card.

Generate a Production Order. Don’t forget that we can only produce the item in a CASE UOM.

Figure 5. Production Order.

The production Journal will reflect the quantity of eight (8) components (raw materials) that are required (from the BOM).

Figure 6. Production Journal reflecting quantity of components required.

Post and finish the Production Order, change the Status to Finished, then look at the ILE (Inventory Ledger Entry) for the entries. The CASEUOMTEST has an output quantity of 1, the raw material is consumed, 1X8 for a total of quantity. Note that it is the same Production Document No. It was shipped so the Sales Shipment No. shows, with a <CR>, minus quantity.

Figure 7. Item Ledger Entries.

Create a Sales Order and ship the CASEOUMTEST Item as an Item on Sales line.

Figure 8. Sales Order set up to ship the CASEOUMTEST Item as an Item on Sales line.

Check the Item Card and see the correct UOM and Quantity have been posted.

Figure 9. Item Card showing correct quantity on hand has been posted.

Figure 10. Item Ledger Entries showing correct UOM and quantity have been posted.

For more information on this function or questions about Microsoft Dynamics NAV, contact ArcherPoint.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How Microsoft Dynamics NAV Calculates the Unit Cost on the Item Card

From time to time we get the question, “How is the Unit Cost on the Dynamics NAV Item Card calculated?”

It seems like a simple question, but in large part the answer is not well known.

We sometimes describe the Unit Cost on the Item Card as the “weighted average cost of the remaining inventory”.

If we look at the Invoicing Tab on the Dynamics NAV 2013 Item Card, we see that the Unit Cost is 42.80.

Figure 1 – Invoicing Tab on the Dynamics NAV 2013 Item Card

The question is, how did Dynamics NAV calculate that number?

To understand how Microsoft Dynamics NAV calculates Unit Cost, one has to understand NAV’s Item Ledger Entries and NAV’s Value Entries. When an inventory transaction is recorded in NAV, an Item Ledger Entry and an associated Value Entry are automatically entered into the NAV database. The Value Entry reflects the cost of that transaction, whether positive or negative. Additional Value Entries may later be added by adding an Item Charge or the adjust cost program. 

Dynamics NAV calculates the unit cost by finding the Value Entries for the item and then adds up the Cost Amount (Expected) and Cost Amount (Actual) to get the total cost. It then adds up the Item ledger Entry Quantity and then divides the total of the costs by the total of the Item Ledger Entry Quantity to get the Unit Cost.

Figure 2 – The Unit Cost is the sum of the cost amounts divided by the total of the Item Ledger Entry Quantity

If you would like to discuss this or any other Dynamics NAV costing or inventory valuation topics, please contact ArcherPoint.

If you enjoyed this blog, you might like to check out our collection of Development Blogs, as well as our "How To" blogs for practical advice on using Microsoft Dynamics NAV.

How to Create a Revenue Account Schedule in Microsoft Dynamics NAV

In another blog post, we demonstrate how to create a Revenue Finance Performance chart using the Cronus demo data in Microsoft Dynamics NAV. However, to create the chart, you need to have an existing Account Schedule from which to pull data. This blog post will demonstrate how the Cronus Revenue account schedule was set up so you can create your own revenue account schedule using your own G/L accounts.

NOTE: The scope of this blog is strictly for the Revenue account schedule that was used in the Finance Performance Chart blog. There is much more to Account Schedules in Microsoft Dynamics NAV that will not be covered here, so please contact ArcherPoint if you have other questions about Account Schedules.

Pull up the Account Schedules and click New.

Figure 1 – Account Schedules

Type in the Name and Description of the Account Schedule. In this case, Cronus named it Revenue. If desired, you can fill in a Default Column Layout and Analysis View. The Column Layout and Analysis View are separate setups that would need to be done as well. Then Click Edit Account Schedule.

Figure 2 – Name Account Schedule and click Edit Account Schedule

From the Edit Account Schedule screen, you can determine what you want your account schedule to consist of. Below, we will show the relevance of the different fields for our Revenue Account Schedule.

Figure 3 – Edit Account Schedule screen

Description: This column of fields is, as you would guess, just a description. In this particular case, the Revenue description is being used as a title should you run any reports off of this account schedule.

Bold: This field allows you to bold any descriptions on the Account Schedule should you run a report off of it.

Row No: This field is not required but can be filled in order to use those rows for formulas. In this particular account schedule example, although the row numbers are filled in, they are not being used in a formula in the account schedule but are available for future use.

Totaling Type: This column determines the type of field the next column (Totaling) is. Posting Accounts populates by default and is sufficient for this account schedule example as our data is being pulled off of the G/L accounts. Other options include Total Accounts, Formula, Cost Type, etc. See Figure 4 for all options.

Figure 4 – Totaling Type options

Totaling: This column is the information being used for our Finance Performance Chart. In this particular case, 44100 is the G/L account number for Sales, Retail – Dom in the Cronus chart of accounts.

Show Opposite Sign: This allows the information to display in opposite sign. In NAV, debit amounts are displayed as positive numbers and credit amounts displayed as negative. Sales are posted as credit amounts, so they would display as negative numbers, which would make our Revenue Chart look weird. Show Opposite Sign is checked so on our chart they will display as positive numbers.

Analysis View: These three columns are Dimensions. The labels of these columns are determined by the setup on the Analysis View. We will not go into detail about the Analysis view as it is beyond the scope of this blog. Refer to Figure 5 to see where the Dimensions were determined. Up to 4 Dimensions can be set up.

Figure 5 – Analysis view

Area Code Totaling (Dimension 1 Code): As mentioned above, this field is dependent on what Dimension was set up. In this case, the Revenue account schedule is using this field to filter on the Area dimension codes. See Figure 6 for the Dimension Value List.

Figure 6 – Dimension Value List

That is the setup for our Revenue Account Schedule that was used by the Finance Performance Chart blog. Once you have this in place, you’re ready to set up your Finance Performance chart. If you have any questions, please contact ArcherPoint.

Do you have questions about other functionality in Dynamics NAV? Contact ArcherPoint; we’ll be happy to help you find the answers.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.

How to Create Revenue Charts to Display in Your Role Center Using Microsoft Dynamics NAV Finance Performance Charts

This blog explains how to use Microsoft Dynamics NAV Finance Performance charts to create a revenue chart that you can display in your role center. The example in this blog uses the Cronus Demo.

NOTE: Finance Performance charts are based on account schedules, so you will need to have existing account schedules. If you need help setting up a revenue account schedule, read this blog.

First things first. To use the Finance Performance charts, you must be using one of three profiles: Accounting Manager, President, or President-Small Business. It is not available to any other profile role.

Figure 1: Profiles that can use Finance Performance

Next, you may need to add Finance Performance to your role center by customizing the page as it is typically not visible by default.

Figure 2: Add Finance Performance to your role center.

Now that the Finance Performance is visible on your role center, click the Select Chart button which brings up the Account Schedule Chart List then click New.

Figure 3: Select Chart (circled in green) then click New (circled in yellow)

Next, name your chart. In this example, it is named “Revenue” with the Description of “Revenue Chart”. In the Account Schedule Name drop down, select the Account Schedule on which you will be basing your chart. In this case, the chart being used is Revenue.

Figure 4: Name the chart and select the Revenue Account Schedule Name.

After selecting Revenue, the Column Layout Name should default based on how the Account Schedule is set up, but you do have the option to choose a different layout. In this example, it defaults to BUDGANALYS. The Base X-Axis has been left as Period since that is what we want our X-Axis based upon in this example. Based on your selection, some of the other fields may or may not become available. For example, since Period has been selected, the End Date field is not available.  Enter a starting date, Period Length, and No of Periods you want on your chart. In this example, the start date is 01/01/16 with the period length set as Month and 12 as the number of periods.

Figure 5: Fill out the Data Source information.

Next, fill out the Y-Axis measures you want the chart to display. To do this, select Edit.

Figure 6: Y-Axis Measures.

After clicking Edit, the Acc. Sched. Chart Matrix will display.  Select what information you want displayed and how you want it displayed. In this example, the Net Change and Budget of Sales Retail–Dom and Sales Retail-EU have been selected to be displayed as columns and the Revenue Total as lines. You have options in the drop down on how you want the data displayed (line, column, etc.).

Note: Only a total of six measures can be used for the chart.

Figure 7: The Acc. Sched. Chart Matrix is used to set which data and how it is displayed.

After that, press OK until you get back to the role center, and your Revenue chart should be displayed. In this case, the chart shows the 12 months on the X-axis and displays the Sales Retail Dom and EU as columns and the totals as lines.

Figure 8: Revenue Chart.

Do you have questions about other functionality in Dynamics NAV? Contact ArcherPoint; we’ll be happy to help you find the answers.

For more step-by-step instructions on how to perform specific tasks in Microsoft Dynamics NAV, see our collection of How-To blogs.