Hi. @lubos@Tut
Is there any way (in the future release) to link an inventory write-off to one of the production orders because the loss was during the manufacturing process not while the raw materials was in the warehouse.
In Manager , the inventory write-off is for:
record loss
Damage
Obsolescence
Inventory reduction
But not for the loss during the business operations.
In this way we will able to know how much is the loss when the inventory was in the warehouse and how much is the loss during the production operation.
you can just create a custom field for Inventory Write-offs with a drop-down list to categorize the same. this will easily help identify the type of loss.
or you can simply create a separate account for Production Losses in your chart of accounts and select the same when entering an inventory write-off.
Hi
Thanks for the suggestion
It was great
But I still have an issue
I bought a 142 pieces of raw material from my supplier
While putting the raw material in the machine I lost 2 pieces
These 2 pieces are on my charge because it’s my fault
Then the production operation begun with 140 pieces as raw mat
This operation take a three weeks to be done
In the 7th day I checked the machine and i found 11 pieces damaged
In my business this is the fault of the supplier because his material Don’t match the standards
Now, If i add a write off of 11 pieces , my inventory qtt shows -11 because it still considers that my machine consumes or contains all the 140 pieces
And I checked my machine again in the 14th day, any damaged pieces found are on my charge because my machine didn’t work properly
So i need to differ between the two types of loss
To make this happen in the actual version of Manager i should add an inventory write off and modify the production order by decreasing the input qtt to match it with the inventory items qtt
What i mean that i need to articulate the writeoff with the production order to have a direct impact on the inventory items qtt
Thanks
you have not mentioned the output quantity of your finished product.
if the finished product quantity is also reduced due to the reduction in raw materials, then you will have to edit your production order anyway. so you can adjust the raw material quantity in your production order itself.
My opinion is that writing off inventory as part of a production order is a bad practice. The situations you described, @Muslim, do not justify that:
The first 2 lost pieces have nothing to do with the production order. They were apparently lost during handling or storage, exactly the kind of thing write-offs are meant to cover. So write them off. If you want the production order to produce the same output, take two more input items from stock, and continue. The write-off will properly adjust quantities on hand.
The next 11 pieces were defective from your supplier. This must be addressed with the supplier, who should either give you a credit note that you enter as a debit note or replace the items. If you enter a debit note, that will reduce the quantity of input items, just as though they had never been received. So your inventory count will be low, because you still will have taken 11 from stock. That non-revenue reduction suggests a write-off is appropriate. If you want, you can segregate that expense as @sharpdrivetek recommended. If they are simply replaced, no further adjustments are necessary for those input pieces.
Any damaged pieces found on the 14th day are somewhat like the 11 defective pieces. The original production order already removed them from inventory. So you don’t need a write-off to adjust quantity on hand. The difference in how you handle them is because you have no debit note to offset.
In the last two cases, the bigger problem comes from the effect on output inventory from the production order. Presumably, if fewer items go in or items are damaged, less production results. Many industries face this problem and keep track of yield rates. Sometimes, yield reductions are caused because not every skilled operation is successful. If yield rates are fairly constant, most businesses include yield allowances in production orders. For example, if every output item includes 1 of a specific input item, a production order for 100 might include 110 input items. This will often be inexact, and may still require periodic input adjustments, often posted to a yield loss expense account.
But what should you do with the different output quantity? That is also a non-revenue transaction. And either write-offs or write-ons are appropriate.
My overall point is that editing the production order hides what really happened. That knowledge of losses, damages, and yields is useful planning information. It seems much wiser to make adjustments after the fact, recording the actual results of operations, than to go back to a production order written weeks before and make changes based on later events.
Exactly @Tut , you described it better than I did
Yes, This what I’m facing
And the issue is not about refunds because Manager has the solution in the credit/debit notes, but as a business owner i should know where my business fails, wich customer i do better with wich items is most profitable and wich operations are most efficient
I suggested in another post to add a start / finish production dates , but i realised that couldn’t solve the problem , but a write off in the production order will solve it, because any lost Qtt in the production order will disappear, and the calculation of the input cost is based on the first taped Qtt
In my example , when i add a production order by 140 input pieces then I added a write off by 11 pieces my inventory item shows a minus qtt because Manager already consider the production order as white off from 140 to 0.
Hi
I tried to add a credit note contains the Qtt of 11 without a price
Well I’m considering the garbage basket as a customer!! Without paying
I found this :
My balance is correct
My inventory is correct
any other suggestions
Or
what if there’s a check cases in the write-off and choose if the write-off is under stock or under production
If the first case is chosen: there’s an impact on the inventory Qtt
If the second case is chosen : then we could choose the PO number and there’s no impact on the inventory Qtt, because the PO has already taken the needed Qtt from inventory.
You mention using credit notes. There should not be a credit note in any of this, no matter how you approach it. A credit note gives credit to a customer of yours and would return inventory items to stock. In my second case, where the supplier was at fault, there could be a debit note.
I appreciate your desire to understand, as a business owner, where things have gone wrong. Modification of production orders will hide the problems, as I said earlier. Use of write-offs will clearly show the problem. A good write-off transaction will include narration the Description field of why the write-off is being made. And posting to appropriate accounts will summarize the costs for different types of write-offs.
You correctly point out the problem, but are missing its consequences. When the quantity in the production order disappears, the cost of the lost or damaged items will also disappear. Except when your supplier reimburses you, those lost or damaged items are a real cost and need to be preserved. Eliminating them from the production order would lower your cost of production, but the loss/damage actually increases it. That increase will be captured by the write-off.
Hi
Yes you’re right the credit note was a wrong step.
But For my situation I don’t need any refunds or returns otherwise I use debit note
But the quatity is already disappeared from the inventory and added to production to transform it to another item, of course the cost wasn’t disappears but transferred to the new item. And this is my point when I said
For the moment I use the method you described
And I ineed also to decrease the quantity input in the production order in order to get the right number in inventory tab
Because it’s not logic to get the Qtt off in two places: PO and Write-off
Also this treatment will decrease the cost of the the new output item because Manager will consider the write-off as expenses and not as a cost of production and this is my big issue
This is true. But I understood you to say you would effectively edit a production order so the input item was removed from it. In that case, Manager would make a retroactive change and fewer input items would be removed from inventory. Or, to use your words, a lower quantity would be disappeared.
That is exactly what should happen. The lost and broken items are in the waste bin, so their cost is not in the finished goods. If they were in the finished goods, they would eventually reduce your net profit, but only after they were sold. If they are accounted for as expenses through a write-off, they will reduce your net profit now. Meanwhile, you will not have finished inventory sitting in stock at an inflated cost.
Ok
So we can’t use the average cost of the produced item while pricing ( pricing to sell the item) because it doesn’t reflect the real value of the production in my case i used 140 pcs in the beginning, but at the end only 129 pcs are still as input in PO , whatever the output is 1 pcs or 100 pcs
&
What if there’s a possibility to add a line in PO with negative value instead of writing-off the damaged Qtt during the production operation?
E.g.
in my case:
Baying 142 pcs of A to transform it to B
Write-off of 2 pcs of A because they are damaged during handling
Day 1 : Use 140 pcs of A to begin the production by a PO with 0 Of B , so my inventory is A=0 and B =0
Day 7: I found 11 pcs damaged , so I added a line to the PO by negative value A=-11 (this is not allowed in Manager for now), and in the same time I add a write-off of A by 11 pcs, and A=B=0
Day 21 : i have 100 pcs as result, so I mentioned in my PO that output is B=100 pcs, and in my inventory A is 0 and B is 100
So my 100 of B cost 140 or 129 of A ?
So my issues are the traceability of my production steps , havin the right numbers in inventory item Qtt and knowing how much B is cost
You are demonstrating the problems to yourself. The reason you cannot add negative line items is that you end up in situations like you describe, trying to force the program to transfer costs when the average cost is already zero because you have no stock.
Go back and think this through carefully. You want the inventory on hand to reflect its actual cost. But, in your mind, that cost includes the price of input items that are not represented in the output. They were lost or broken. And such costs are normally considered current expenses, so they are posted to a wastage, yield loss, or similar expense account.
If you really want them to be included in the cost of the finished good, you will have to do it in two steps:
Write off the losses to a suitable expense account.
Use a journal entry to transfer the costs from that expense account to Inventory on hand.
Your auditors might not like it, but that is how to do it in Manager. And that way, you still get to see the loss information by examining the expense account, while if you modify the production order, you lose that knowledge.
as a suggestion, i think it would be better to split your production into two or more stages depending on the number of times you check the production progress.
First stage production.
Raw material A = 140
Finished item B = 140
now during the first check you find 11 items damaged.
Second stage production.
Raw material B = 140
Finished item C = 129
this will include the cost of all 140 items to your cost of production.
now after the final check.
Third stage production.
Raw material C = 129
Finished item D = 100
this procedure will not require any inventory write-off (required only for the 2 items damaged before production) and the total cost of all raw materials will be include in the finished good production.
Using writing-off required PO modifications, and we’re agree that this will falsify the results, and also charging the inventory on hand by a losses cost from the write -off allocation account through journal entry will falsify the results because when the unit price change the accounts of losses change because the journal entry transfer the values not the Qtt , a small operation will show it clearly, so using this method should be with a lot of caution.
The second method is better, either using the same item as input an output or using a different items as @sharpdrivetek used in his example but it forces us to add a lot of useless data in Manager, example: one production order will be two or three orders , imaging after one years how such separated data i ll have on Manager.
Well
I think that I’ll use the first described method -with a lot of intention- until having something else because this issue should be solved carefully, especially for the industrial business
However, thanks a lot and hope manager make this easier in the next releases.
