Item A - You should have issues a PO to your vendor to order the material so
yes you should receive it into inventory in the bin and/or warehouse you
have selected.
Item A1 - The inventory you have on consignment has a cost. The cost on
your PO. The fact that it is a consignment just means that you do not have
to pay for it until you sell it and if you cannot sell it you can return it.
That is the agreement part of consignment. Consignment is a contract
between you and the vendor that your terms are "payment upon sale or use of
material" and that return is guaranteed by the vendor.
It is still a liability because you owe the money for the material. You are
not getting the material at no cost you are getting it with non-standard
terms. Ownership of the parts is not really a question as far as costing in
this situation goes. If something happened to you premises and the parts
were destroyed your commercial liability insurance would pay for the
material. If you use or sell the material you have to pay for it. If your
vendor were to declare bankruptcy, the material would be considered an asset
by the court and they would immediately look to your company for payment or
return. So the concept of consignment really defines terms and return
policy and ownership becomes questionable depending on the circumstances.
Item A1 - Where should the costs go when you sell or use the material. If
you use the material the cost should go to the job and follow through WIP
and then COG like any other material. You of course then will pay for it.
If you sell the material to your customer then it will go straight to COG.
As a controller I would set up a separate account on my GL for this because
it would help me to see my liability, which will not be reflected in my
Accounts Payable because I have not received a bill yet. It would also make
it easy to reconcile this account with actual goods in inventory. Also this
material is not counted as an asset in some types of financial reporting and
it will always be easy to know what that number is when preparing those
reports.
Also you need to look at the issue of the "Received But Not Invoice Report".
If receiving is integrate with Accounts Payable then you will receive the
material against the PO when it arrives, but you will not get a bill from
the vendor until you sell or use the material. Consequently it could remain
on that report anywhere from a few days to many months. If you are
reconciling the report against the "Received Goods Account", "Purchases
Account", or whatever nomenclature you company uses for this account, it may
be inconvenient (confusing) for you to have the material remain in that
account. In which case you would need to look at some procedure
modifications in Accounts Payable to remove and show that receiver as
invoices.
Earlier in your e-mail you also mentioned that you would be doing the same
for some of your distributors. Let me know and I am happy to discuss how
that might be handled and what that means both procedurally and financially.
Thanks
Cameron A. Janish
Misha1 cameron@...
Toll Free: 866-464-7421
Office: 708-445-7509
Cell: 630-712-9520
Office Fax: 630-893-1307
Direct Fax: 443-638-0489
-----Original Message-----
From: Rick Gors [mailto:rgors@...]
Sent: Thursday, January 24, 2002 08:31 AM
To: vantage@yahoogroups.com
Subject: [Vantage] Consoigned Material (I am customer scenerio)
I am doing both types of consigned stock: My vendor(s) "fronting" us
material as well as we will be putting material onto some distributors
shelf.
My questions regard the first situation.
My company is Osco. My vendor is ABC heaters. I plan to create a
warehouse called ABC Consigned Material. I can use from, and sell from
these bins. That all seems okay to me.
A) What's the best way to get the parts into the bins? Quantity
Adjustment seems to be the way to go. If I cut a Purchase Order and receive
to the warehouse, then I have problems with inventory costs applied to parts
that I don't own. But if I Adjust the parts into the bin, do I have a cost?
Does the cost get applied to COS and/or jobs?
B) Should I set up another separate GL account for the consigned warehouse
goods?
I may have more questions on this topic, but that's it for now.
Also, I believe in the future, more and more of us will be having to
implement this consignment jazz because business is so tight. Just like the
new "standard" in customer payment terms seems to becoming Net 60 days.
TIA
Rick Gors
MR/MMIS
Osco
[Non-text portions of this message have been removed]
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[Non-text portions of this message have been removed]
yes you should receive it into inventory in the bin and/or warehouse you
have selected.
Item A1 - The inventory you have on consignment has a cost. The cost on
your PO. The fact that it is a consignment just means that you do not have
to pay for it until you sell it and if you cannot sell it you can return it.
That is the agreement part of consignment. Consignment is a contract
between you and the vendor that your terms are "payment upon sale or use of
material" and that return is guaranteed by the vendor.
It is still a liability because you owe the money for the material. You are
not getting the material at no cost you are getting it with non-standard
terms. Ownership of the parts is not really a question as far as costing in
this situation goes. If something happened to you premises and the parts
were destroyed your commercial liability insurance would pay for the
material. If you use or sell the material you have to pay for it. If your
vendor were to declare bankruptcy, the material would be considered an asset
by the court and they would immediately look to your company for payment or
return. So the concept of consignment really defines terms and return
policy and ownership becomes questionable depending on the circumstances.
Item A1 - Where should the costs go when you sell or use the material. If
you use the material the cost should go to the job and follow through WIP
and then COG like any other material. You of course then will pay for it.
If you sell the material to your customer then it will go straight to COG.
As a controller I would set up a separate account on my GL for this because
it would help me to see my liability, which will not be reflected in my
Accounts Payable because I have not received a bill yet. It would also make
it easy to reconcile this account with actual goods in inventory. Also this
material is not counted as an asset in some types of financial reporting and
it will always be easy to know what that number is when preparing those
reports.
Also you need to look at the issue of the "Received But Not Invoice Report".
If receiving is integrate with Accounts Payable then you will receive the
material against the PO when it arrives, but you will not get a bill from
the vendor until you sell or use the material. Consequently it could remain
on that report anywhere from a few days to many months. If you are
reconciling the report against the "Received Goods Account", "Purchases
Account", or whatever nomenclature you company uses for this account, it may
be inconvenient (confusing) for you to have the material remain in that
account. In which case you would need to look at some procedure
modifications in Accounts Payable to remove and show that receiver as
invoices.
Earlier in your e-mail you also mentioned that you would be doing the same
for some of your distributors. Let me know and I am happy to discuss how
that might be handled and what that means both procedurally and financially.
Thanks
Cameron A. Janish
Misha1 cameron@...
Toll Free: 866-464-7421
Office: 708-445-7509
Cell: 630-712-9520
Office Fax: 630-893-1307
Direct Fax: 443-638-0489
-----Original Message-----
From: Rick Gors [mailto:rgors@...]
Sent: Thursday, January 24, 2002 08:31 AM
To: vantage@yahoogroups.com
Subject: [Vantage] Consoigned Material (I am customer scenerio)
I am doing both types of consigned stock: My vendor(s) "fronting" us
material as well as we will be putting material onto some distributors
shelf.
My questions regard the first situation.
My company is Osco. My vendor is ABC heaters. I plan to create a
warehouse called ABC Consigned Material. I can use from, and sell from
these bins. That all seems okay to me.
A) What's the best way to get the parts into the bins? Quantity
Adjustment seems to be the way to go. If I cut a Purchase Order and receive
to the warehouse, then I have problems with inventory costs applied to parts
that I don't own. But if I Adjust the parts into the bin, do I have a cost?
Does the cost get applied to COS and/or jobs?
B) Should I set up another separate GL account for the consigned warehouse
goods?
I may have more questions on this topic, but that's it for now.
Also, I believe in the future, more and more of us will be having to
implement this consignment jazz because business is so tight. Just like the
new "standard" in customer payment terms seems to becoming Net 60 days.
TIA
Rick Gors
MR/MMIS
Osco
[Non-text portions of this message have been removed]
Yahoo! Groups Sponsor
ADVERTISEMENT
Useful links for the Yahoo!Groups Vantage Board are: ( Note: You must
have already linked your email address to a yahoo id to enable access. )
(1) To access the Files Section of our Yahoo!Group for Report Builder and
Crystal Reports and other 'goodies', please goto:
http://groups.yahoo.com/group/vantage/files/.
(2) To search through old msg's goto:
http://groups.yahoo.com/group/vantage/messages
(3) To view links to Vendors that provide Vantage services goto:
http://groups.yahoo.com/group/vantage/links
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
[Non-text portions of this message have been removed]