Moving Partial WIP costs from open jobs to Cost of Sales?

Kinetic ERP
1

Hi,
We are using project jobs to book labour costs.

Is there a way that we can move a portion of the WIP value on the job to the Cost of Sales accounts - without partially shipping the job?

I’ve considered doing a manual journal, but would want to have some sort of link to the job, so that the outstanding WIP value on the job decreases.

For anyone interested in why we would want this, I’ve outlined our current process below. Would also be very keen to hear if there are other ways to achieve this.

  1. We have sales orders with lines that are ‘Make Direct’. The unit cost on each line covers all costs, including project costs. Each line has a manufacturing job linked to it.
  2. Separately, we link the sales order to a project, which has a project job.
  3. Our design engineers/Project managers book time to the project job. (Their time is general, so they do not book time to a specific manufacturing job).
  4. The manufacturing jobs are completed and shipped from WIP. These will have various delivery dates, spanning multiple months.
  5. Invoices are raised against the shipments.
  6. The project job is still open in WIP but it does not need to be shipped/invoiced.
    a. Each month, we wish to do a manual journal to relieve a proportion of the WIP value on the Project Job to the ‘Cost of Sales’ account.
    b. This proportion is calculated based on the value of Sales Order lines that have been shipped/invoiced that month.
    c. We would then close the job once all WIP has been moved to Cost of Sales…

Thanks!

2

Not sure if this is a potential avenue… but have you looked at “Capture Project Revenue Recognition”?

There’s a checkbox on that process to Capture COS & WIP.

Help Documentation:
Run the Capture Project Revenue Recognition process to calculate (capture) revenue for projects. The process results are defined by analyzing the selected project(s) with an Apply Date that is less than or equal to the defined As of Date. This process allows you to recognize revenue at different stages of a project.

2 Likes
3

Thanks @dcamlin, not used Revenue Recognition before but it looks interesting.

Will play around with it to see if I can get it to move a manual/specific amount from WIP to COS.

4

Yeah, there are a handful of Recognition Methods in there you can choose from, so you’d have to see if any of them suit your needs.

5

I thought there was a way to run the capture process on open jobs to relieve WIP, but I can’t find it. Maybe ask your CAM that question to at least find out if there is a way.

6

We use Manual Recognition, which allows one to choose the revenue and cost.

1 Like
7

Is manual recognition only a project thing?

8

If you are using projects, revenue recognition is the way to go. For non-project jobs, you could close the jobs and run a COS\WIP capture, then reopen them to incur more costs. But then you run the risk of MRP creating new jobs if there is still a shipping demand.

2 Likes
9

Thanks for the feedback, all.

Is below the correct process for Manual Recognition? Think I must be missing something somewhere.

  1. Opened Project Entry > Revenue Recognition
  2. Entered ‘500’ labour costs in the ‘To Be Recognized’ column

image

  1. Set the following field to ‘Manually Entered’

image

  1. When I preview the ‘Edit List’, I see ‘500’ under the ‘Cost of Sales to be recognised’ column.
    image

However, the GL Account summary recap at the bottom shows a different value of 103.88 being credited to WIP and debited to Cost of Sales.

Not quite sure how it’s getting to this number :thinking:

10

Yes. The closest thing with is Deferred Revenue but that’s more for subscriptions, extended warranties, etc

1 Like