The following scenario happens quite regularly and creates big problems for Profit & Loss Statements (and also has tax ramifications due to net profit being artificially inflated).
- Customer orders something not in stock
- We submit a Purchase Order to the manufacturer
- Manufacturer sends us the goods
- We invoice the customer and ship the goods
- Amounts show up under accounts receivable but COGS is not adjusted until we receive the invoice from the manufacturer
- Invoice is received and entered up to a month later and COGS is adjusted, causing Net Profit to drop
When trying to determine daily, weekly and monthly profitability, this causes Net Profit to be artificially high and thus we are unable to accurately determine our profit margins.
Our current system will use a historical average cost in COGS until the goods are actually invoiced and the amounts are corrected. This leads to significantly less fluctuation in Net Profit and more accurate reporting. The only way to achieve the same effect in Manager is to falsely put in a purchase invoice which causes additional problems:
This is an additional step when creating a sales invoice, which must be done only if the quantity is becoming negative. If it is forgotten just one time or done when it does not need to be, even more problems are created.
When the purchase invoice is actually received and entered, if the person entering it does not realize there was already a purchase invoice entered in, we have a duplicate entry = big accounting problems (i.e. someone accidentally pays it twice after seeing it under accounts payable) since it appears POs are not linked to PIs except for just entering in the ID - you cannot look at a PO and see all the PIs linked to it.