We have been struggling to find a way to have a precise understanding of our costing (and hence margins) mainly because we import our items and therefore they have three cost components: cost of goods, transport, import duties. Moreover, we often keep part of the stock bonded and therefore the import duty component of the stock is added at different points in time when batches of stock are cleared from customs. The average costing in Manager does allow us to track all these parts of the cost of the items, and everything gets even more complicated because of forex rates.
Because of this, I have now thought of using Production Orders to maybe solve this issue. We could use the items as materials, even if they are already the final items that we sell. In the Production Orders we could add fictitious materials at cost zero if necessary. We would then create Production Orders only for the quantities of the items that are cleared, while the remaining stock that stays bonded would stay in the books as an asset for future “prroductions”. This should allow us to track the cost of only the stock that is cleared and hence has been allocated all the three cost components, and therefore when we sell the items the COGS should only take in consideration the “produced” (cleared) stock.
Has anyone tried something like this? Do you think it could work?
You could use Production Orders for this purpose but for that you have to create an Item for each state.
Lets say Item A - In transit, Item A - Bonded Warehouse, Item A on Hand.
and whenever Item A goes from one state to another you have to create Production Order. One issue there is that you cannot go back like you can convert Item A- In transit to Item A - Bonded warehouse/on hand but you cannot go the other way around as production stages will cause issues.
Also note there is a new method for Inventory valuation where cost is manually entered for each item but i dont think you are gonna use that as i think you are after precise costing.
I would only use one state called in transit for all goods that are not cleared (hence goods in transit and bonded) and then use the goods that cleared as stock on hand. I have never used Production Orders, and from what I see I am not sure on how to create the materials needed to produce the items and how the whole thing works, because there would be the complication of allocating transport cost and duties to the fictitious materials (the actual items). I will have to do some research.
I read about the manual Inventory Revaluations and indeed it could help me to achieve my goal, but it would be pretty time-consuming as we have hundreds of items.
Production orders are simple. No such thing as creation of material. Just select Finished item as your destination item like Item A - on hand and select bill of material as Item A - in transit.
You can add the duties and other costs as Non-inventory costs in the Production order.
Finished item will increase in qty and Bill of Material Item will decrease.
Cost of BOM items is allocated to finish items.
Create a test business you can easily get the idea from it.