Inventory Reason Code Setup

  • Inventory Reason Code Setup

    Posted by DSC Communities on February 6, 2017 at 9:42 am
    • Curt Bluhm

      Member

      February 6, 2017 at 9:42 AM

      We set up several inventory codes in GP2016.  We wanted to make sure we were providing a reason for each adjustment that is being made.  However, I’ve run into a snag with this thinking.  In order for us to use the reason code functionality with adjustments, I have to assign a default GL code to use with the reason code.  This is putting all my inventory adjustments in for returns (for instance) into one GL code.  I would either want these returns to go against my inventory account or my COGS account.  Am I setting this up incorrectly?  Or am I trying to use this for something it’s not intended to do?

      Thanks.

      ——————————
      Curt Bluhm
      CFO
      ADO Products LLC
      Plymouth MN
      ——————————

    • Amber Bell

      Member

      February 6, 2017 at 11:05 AM

      Hello Curt,

      I wanted to send some information about reason codes and returns.

      1. You should not use an Inventory GL account for the offset. This would cause Inventory and the GL to be out of balance. This is because the account you are assigning via the Reason Code Setup window would be the offset. Basically, using an Inventory Account would make the Journal Entry net to zero for your total Inventory Value in the GL. It needs to be an Expense account (COGS or some account used for Damaged goods, destroyed goods, etc.)
      2. If you are dealing with returns from Customers, you should be doing a Sales Order Processing Return. If you are doing these as AR transactions and Inventory Transactions (2 separate transactions)…you will not get good reporting in Sales Order Processing because it will look like you sold more items vs. Sales – Returns = Total Sales. Please see attached document to see how to create a return.
      3. If you are dealing with PO Returns, these should also be done in another screen (in this case: Purchasing > Transactions > Returns Transaction Entry).
      4. Lastly, if you have different reasons for your Adjustments that you want to go to different accounts, setup multiple Reason Codes. Example: DAMAGE-WATER, DAMAGE-MISC, DAMAGE-FIRE.

      Let me know if this helps,

      ——————————
      Amber Bell
      Owner
      Training Dynamo LLC
      Derby CT
      ——————————
      ——————————————-

    • Sally Diehl

      Member

      February 7, 2017 at 9:22 AM

      Curt ~

      A GL account is not required on a reason code.  It is beneficial if you are trying to use the reason code for recording why the adjustment is happening – damaged, stolen, etc.

      As Amber mentioned, the reason code account is the inventory offset override if utilized. 

      Good Luck!

      ——————————
      Sally Diehl
      Director Technology and Management Consulting
      RSM US LLP
      Minneapolis MN
      ——————————
      ——————————————-

    • Amber Bell

      Member

      February 7, 2017 at 11:08 AM

      Hi Sally,

      I tested and it is required for Variances and Adjustments. It is not required for Transfers. You can save the Reason Code without checking the boxes for Transaction type…but then it is unusable. As soon as you check the box for Variances or Allowances, the GL account becomes required.

      Also, I would suggest that you set the Reason code to “Decrease Only” if you are using it to account for damaged or disposed of inventory.

      (BTW: I was going to say skip adding the account because I thought it would just use the item’s defaults…but I tested and found the above info)

      Hope this helps. (I think I might write something up about this for a GP Credentialing test question!)

      ——————————
      Amber Bell
      Owner
      Training Dynamo LLC
      Derby CT
      ——————————
      ——————————————-

    • Curt Bluhm

      Member

      February 8, 2017 at 8:17 AM

      Thanks Amber and Sally for your replies.  This helps me understand my options.  I really do appreciate your input.

      ——————————
      Curt Bluhm
      CFO
      ADO Products LLC
      Plymouth MN
      ——————————
      ——————————————-

    DSC Communities replied 7 years, 5 months ago 1 Member · 0 Replies
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