As with other ERP solutions, the month end close process in Microsoft Dynamics 365 Business Central is unique. This series leverages what is unique to Business Central in order to help you draft your own period-end checklists.
This series covers the following areas:
Calculate Depreciation (Amortization)
Assuming you have set up depreciation on both the level of fixed assets and the depreciation books, a monthly routine can be run to automatically calculate and post the depreciation on your fixed assets.
The routine can be found by either searching for Calculate Depreciation in the search bar or exploring to Finance, Fixed Assets.
|Depreciation Book:||The option to select between depreciation books, if different books were set up (e.g. accrual books, tax books)|
|FA Posting Date:||The “ending date” for the depreciation calculation;|
|Use Force No. of Days:||Whether to use the Force No. of Days (below) value.|
|Force No. of Days:||The option to override the calculated number of days of depreciation with a user-defined one. Useful if doing partial/mid-period posting|
|Posting Date:||The posting date for the batch. If you’ve enabled FA/GL posting date matching in the Depreciation Book, you can leave this blank.|
|Document No.:||Leave blank to use default FA journal numbering or specify different document number.|
|Posting Description:||The description to be posted to the journal.|
|Insert Bal. Account:||Option to auto-insert the balancing account set up in the FA Posting Group table in your entries.|
This then generates the relevant entries into the FA G/L Journal, which you can the post by click on Post in the ribbon.
Alternatively, you can manually post the depreciation of a fixed asset using the Fixed Asset General Journal, which you can go to by searching for Fixed Asset G/L Journal or exploring to Finance, Fixed Assets, Journals.
Then you can:
1. Enter your posting date and select:
Account Type: Fixed Asset
Depreciation Book Code: Which Depreciation Book this is accounted against (e.g. accounting, tax)
FA Posting Type: Depreciation
No. of Depreciation Days
Amount: A negative depreciation value
2. Click on the Insert FA Bal. Account button in the ribbon;
3. Post the entry
Writing Down Assets
Occasionally, assets encounter permanent losses in value that need to be recorded in the books. This could be due to obsolescence, damage, or other factors. Business Central allows you to directly post adjustments to the depreciable base of an asset, thereby allowing for correct depreciation to be calculated and posted in an automated fashion (as discussed above).
The way to post an asset write-down is by:
- Open the Fixed Asset General Journal by searching for Fixed Asset General Journal or exploring to Finance, Fixed Assets, Journals.
- Enter your posting date and select:
- Account Type: Fixed Asset
- FA Posting Type: Write-Down
- Amount: A negative integer for the book value write-down
- If you’ve set up the FA Posting Groups with corresponding Write-Down Accounts, you can click on Insert FA Bal. Account in the ribbon;
- Otherwise manually enter the balancing account and remaining Dimensions
- Post the entry
Writing Up Assets
(Same as above, with the exception of setting the FA Posting Type to Appreciation and using a positive integer in the Amount field).
Updating Maintenance Records
One of the most underrated features of the Fixed Asset module is the posting and logging of asset maintenance. Quite often capital assets will include larger items that may require uncapitalized servicing on a routine schedule, such as with vehicle, buildings, server infrastructure, etc.
Assuming you’ve set up maintenance accounts in the FA Posting Groups as well as Maintenance Codes (that specify what kind of maintenance is performed) along with any necessary Allocations for distributing the expenses across Dimensions, the process to record maintenance depends on how you’d like to record it. If it’s a FA subledger-only posting (and has no effect on the general ledger), such as with warranty work, then you’d record it via the Fixed Asset Journal, otherwise you’d use the Fixed Asset General Journal.
After posting this entry, the maintenance log (Maintenance Ledger Entries) for that asset is updated with the recorded service event:
You can also update the future maintenance schedule of your asset by going to Maintenance Registration in the ribbon and entering information around that:
This is particularly useful when pulled into an asset maintenance report or a dashboard, such as the Power BI example below:
Note that the procedures above are for recording and logging expensed service, not for betterments, which can affect the book value, salvage value, and/or useful life of the asset and consequently also affect amortization/deprecation. Those would need to appropriately hit the FA subledger and therefore should be recorded via FA Journals/purchase line capitalization, etc.
Updating Additional Information
While the upkeep of asset details is certainly an on-going need for most organizations, at month-end it is a good practice to ensure that data is accurate.
One such detail you may want to visit, especially when it comes to vehicles and equipment, is the location of the Fixed Asset, generally tracked in the “FA Location Code” on the Fixed Asset Card. For example, if you have a vehicles are being used across multiple job sites or warehouses, you may want to poll or track the location of these for your record-keeping purposes.
You can, naturally, update this field one-by-one on the Fixed Asset cards of the assets or you can use the Edit in Excel feature to mass-update the list based on the best available information and then publish back to Business Central, as shown below:
In my experience, one of the most under-utilized features of the Fixed Asset module is the Insurance management around Fixed Assets. The system allows you to set up insurance policies and assign those policies to your Fixed Assets.
For vehicles, for example, you may have multiple policies that cover different things – liability, collision, comprehensive, personal injury, etc. and you may want to track their expiry and/or insured values. You can also run reports to track uninsured assets and add notes to insurance policies, such as deductibles and other useful information.
The set up and posting of insurance coverages is an entire process and posting in and of itself, but suffice it to say that during month-end it may be pertinent to review and update these and run any of the out-of-box reports around this, such as:
- Fixed Asset Insurance List – to see the policies, premiums, and their effective dates;
- Fixed Assets Insurance Coverage Details – to see the list of insurance policies and their covered fixed assets and insured (coverage) amounts;
- Uninsured Fixed Assets – to see a list of fixed assets that don’t have associated insurance associated with them for coverage;
During the course of the month, there are some adjustments that may need to be made to your inventory – for that, there are a variety of Journals that you can use to make these changes, all of which you can find using the search function.
Physical Inventory Adjustments
Many organizations will perform regular physical inventory counts and will need to update their inventory on hand accordingly.
Within Business Central, there is a worksheet that assists with this task, which can be found by searching for Physical Inventory Journals or by exploring to Warehouse > Inventory.
You can separate these into batches according to different locations or item categories, or you can use the DEFAULT batch.
When you’ve selected the appropriate batch, you then need to:
- Click on the Calculate Inventory… button in the ribbon (shown below);
- Set your posting date accordingly and ensure that both check boxes are selected to have a comprehensive list of inventory;
- If you’re performing specific item or warehouse counts, set the relevant filters in the Item and Warehouse Entry tabs accordingly;
- Click OK to process and populate the journal;
This calculates what Business Central thinks you have on hand for Items by Location. At this point, you’d generally print out the worksheet by clicking Print in the ribbon and check off to show the quantities (and serial/lot numbers if you use serialized inventory) and then print out the worksheet:
Generally the warehouse staff would take this and write-in (in the far-right column) what their counted inventory was and then pass it back to finance. It isn’t uncommon to find customers having some sort of import function built out for them to import in their scanned/counted quantities from a flat-file generated by the scanner gun software/WMS system.
Once the count is done and you’re ready to enter your counted quantities, you:
- Go through the list item-by-item and enter the physical quantities in the Qty. (Phys. Inventory) column;
The system then, based on the difference (if any) will update the quantity and posting type (negative/positive) for you.
- Post the journal when you’re done.
For adjusting the non-financial/non-quantity information on an entry (such as Lot Numbers, Dimensions, Location Codes, etc.) you would use the Item Reclassification Journal.
In this journal batch, simply pick an Item No. and an Applies-to Entry to look up the ledger entry you’re wanting to reclass which then pulls in the old details of the entry and populate the updated values for the reclassification in the “New” columns on the page:
Posted Item Entry Costs
For adjusting the value of an entry you would use the Item Revaluation Journal.
In this journal batch, simply pick an Applies-to Entry to look up and entry, which pulls in the old value for that entry and populate an updated value in one of the “Revalued” columns on the page (changing one will update the other based on Quantity):
Inventory to G/L Reconcile
This report helps identify, as of a set reporting date, any uninvoiced purchase/sales orders with items that have been received/shipped that appear in the inventory reports, however will not show on the general ledger (not counting the interim/expected cost postings). These differences will help monitor the entire process of inventory receiving and shipping.
To run this report, either search for Inventory G/L Reconcile report.
- Enter the date you’d like to view the report as of (e.g. June 29, 2021);
- Use the Item filters as necessary to report on specific items or item groups;
- Run the report;
Item pricing is something that is routinely updated, especially when dealing with Vendors that have ever-changing price lists.
Simple Price Adjustments
There are simple ways to adjust item costs and prices – such as using the Adjust Item Costs/Prices function that can be filtered for specific Items (e.g. for a specific Inventory Posting Group or Item Category Code):
Or, conversely, by using the Edit in Excel function to, for example, filter for a specific Vendor and VLOOKUP against the Vendor Item No. and their catalogue item number:
Sales Price Worksheet
The Sales Price Worksheet, which can be found via search in Business Central, is a page where you can set extensive pricing changes for items across Customer, Customer Groups, and/or Campaigns.
These prices have effective dates (including an end date if a set duration for the pricing is required), quantity breaks, and the Unit of Measure for the pricing.
Now it can be used to set generic pricing across the board, but the more interesting use-case would be for special pricing, illustrated below.
In this illustration, for the month of June, any Customer in the RETAIL Customer Price Group ordering at least 10 boxes of the Item shown above will have the price dropped to $20 per box instead of $25.
Once the pricing is set the way you’d like it, you click on Implement Price Change… and the changes will be committed to the system:
There are naturally more complex scenarios and other data that may require using a Configuration Package to modify, however the general guidance here is to consider these tasks and upkeep as part of your month-end procedures.
Costing is a critical piece of the Business Central world – and there are a metric tonne of costing considerations at month-end. Depending on your costing method, your inventory setup, and all the transactions in your system, there’s a litany of month-end processes to perform. A post on costing adjustments and procedures would, in and of itself, take an entire series of posts to go through, however some notable routines and upkeep that should be on your radar are outlined below, all of which can be found in Business Central search:
- Adjust Cost – Item Entries – probably the most critical routine in inventory costing, this process goes through your inventory subledger and cost application layers and ensures that all necessary postings are handled so you can get accurate cost reports out of the statistics and reporting in the system. This is particularly of import for multi-level cost structures (BOMs).
While generally setting up automatic cost posting would handle the cost postings, it is always best practice to run this before doing any inventory reconciliation or reporting.
- Post Inventory Cost to G/L – this is
- Inventory Valuation Report – another widely-used tool in the inventory reporting toolbelt, this report computes the ending inventory value as of a specific period in time:
- Standard Cost Worksheet – for organizations that use the Standard Costing Method, this is where you’d go to update the standard costs across your inventory.
You can, naturally, populate the worksheet by copy-pasting from Excel, manually populating the journal lines, or utilizing the Suggest function shown below:
You would make changes as you deem fit in the journal lines, roll up any assembly/production costs (using the relevant function in the ribbon) and ultimately implementing the standard cost changes you made by clicking the Implement Standard Cost Changes… button in the ribbon.
Often times there are Items that are now obsolete, discontinued, or – for one reason or another – you do not want to transact with anymore. Conversely you may have blocked an Item because of a longer-term stock-out or certification process and now wish to transact with.
If this is the case, you can either block them one-by-one by going to the Item list and blocking them or en masse using a Configuration Package or the Edit in Excel functionality in Business Central. Below is how you’d use the Edit in Excel capabilities to block them.
- First open up the Item list;
- In the ribbon, go to the Page tab and then Edit in Excel;
- Under the Blocked column, set the Blocked field to True or False to block or unblock respectively;
- Publish the changes back to Business Central;
Note: If you do not have Edit in Excel on your pages, you may be missing the Permission Set that enables you to use the function.
Got questions about Business Central? Contact us directly and one of our ERP experts will get back to you.