Ultimate Guide: Mastering Month-End Closing With Microsoft Dynamics NAV 2017

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Allocating costs at month-end across various departments or cost centers is relatively straightforward in principle, however, once you include indirect costs into the mix, things get more complicated.

Direct costs are easy – you have a cellphone bill for an employee in the sales department, you charge it to that.

Indirect costs, however, are trickier. If you’re a production facility, you’re going to need power to operate. You may want to allocate these across the entire organization – rent, insurance etc. Then, you can decide how you want to allocate that. Figuring out these percentages can be a political process.

In this post, we’re digging into 3 different recurring journals in NAV that can help you out with cost allocation at month end, especially if you are managing a significant amount of indirect costs. 

RECURRING JOURNALS IN NAV

Fixed Recurring Journal

 

Fixed Recurring Journal in NAV

This is the simplest journal type that is used for costs that do not change such as rent, insurance, and contracted amounts (i.e. cleaning). You can use fixed recurring journals to be able to quickly process those during month end and make sure that you only process those once. This is great for instances where you receive invoices on a monthly basis but also scenarios (like rent) where you lock in for a contracted amount of time, but you don’t get an invoice on a monthly basis.

Lots of people use standard journals to do this type of fixed amount journal, however, one of the risks of doing this is that it didn’t tell you when you last ran it or when you should be running it for.

 

Split costs between departments

 

You can also easily split the costs between departments, as seen in the example above where we have allocated the lease 50% each between admin and sales.

One of the other nice things is the ability to set expiration dates. If rent is coming up and will be renegotiated, you can put an end date on it so that you can update the amounts in the future.

TIP: Be sure that the Work Date is set at least equal to or ahead of the recurring journal itself, otherwise, it won’t let you run it.

Set Work Date in NAV

 

Variable Recurring Journal

 

Variable Recurring Journal in NAV

This is designed for costs that will change monthly (or on a bi-weekly basis) such as utilities, salary and compensation, or any operational expense that fluctuates.

It will look at the operational costs and then take whatever allocation (how we want to split it up across departments) and push it back into the ledger itself.

Balance Recurring Journal

This is the least used of the recurring journal types – it investigates all the transactions for a specific period for a specific GL and then takes those transactions and allocates them based on how you’ve told the system to allocate it.

These will typically be used for costs based on an accounts accumulation such as salary and compensation (depending on the size and payroll system), or project-related costs.

Say, for example, we’re looking at a project with a capex GL account, not really tagging any dimension values on it at the time. At the end of the month, it will say, we spent $100,000 this month, how do you want to allocate these costs across department / project codes. Most people do not use these.

Now that you have a good handle on the different types of recurring journals that you can leverage – here are a few quick tips I’d recommend keeping in mind at your next month-end:

QUICK TIPS

Remember to look out for these two “gotchas” when creating recurring journals:

• When creating batches, it’s a best practice to remove the posting number series. If you don’t do that, it will give you a generic series number that doesn’t explain what it’s attached to or that it came from a recurring journal.
• Work dates: Make sure that work date is on or after the posting date on the recurring journal line, otherwise the recurring journal not post the transaction. You can validate if the journal has posted when the Posting Date auto updates upon completion of posting.

Formulas

Formulas can be used in the Recurring Journal Document No. field so that you know where the entries originate from and the time period associated with them. If you use the following formulas to indicate which month or period that transaction was associated with. This will be system generated and the end user will not need to update the journal each month manually to accomplish this.

Use these to easily find the recurring journal entries:

• %1 – The current day number
• %2 – The current week number
• %3 – The current month number
• %4 – The current month name
• %5 – The current accounting period name

Access Recurring Journals with Search

Use search in the top corner to find your recurring general journals, like in the example below:

 

Use search to find recurring journals in NAV

Use Reversals for More Accurate Reporting

The other thing you can do with all these journals, is that you can have a reversing of any of these journal types. It will put the entry on the last day of the month, i.e. for accruals and the very next day it will reverse out that accrual for more accurate reporting.

User Tasks

Tasks can be setup to indicate who and when a recurring entry should be processed. Controllers setup Tasks for their Sr Accountant indicating that occur monthly that there are recurring journals to process . Upon running these journals the Sr Accountant can then make the task as complete which will be visible to the Controller.

Using User Tasks at Month-End in NAV

Overall, using recurring journals in NAV can be very powerful when it comes to allocating costs. If you haven’t already done so, check out our month-end guide for more ways that you can master your close process:

Mastering Month-End Closing eBook

Begin harnessing your Microsoft Dynamics NAV and gain insight into Month-End Closing with this Ultimate Guide.

 

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