How to calc correct GrossProfit in Sales O/I?

Navision uses ONLY average costing in sales order/invoice. It’s very bad… How to calculate true unit cost amount (FIFO) while creating invoice? P.S.: I think it’s impossible, using NF’s logic. Business Applications Programmer Sertified Navision Developer SIA “Sintegra” Latvia

I also think, that this is not always possible, but it has nothing to do with Navision’s logic. (You can not get correct output based on incorrect input): If you do not have purchase invoice (so you have posted just purchase receipt) then you do not know true FIFO cost - you still only guess what will be the purchase price. An you can get the purchase invoice much later after you have posted Sales shipment/invoice. But in G/L you will see the true COGS (If costin method is is FIFO and after adjustment and posting cost to G/L). I always say to my customers, that the profit that they see on Sales order is just expected/estimated one which is not necessarily the true one. Michal

I agree with what Michael has said. As it is very difficult to calculate true profit, especially if all the purchase invoices have not been recorded. Timing issues will occur that is just the nature of things. So I also tell my customers that the sales order profit/margin analysis is just an estimated. _________________________ Wendy O’Connor - co moderator Attain/Financials - End User Questions NOLUG


Originally posted by AlexeyPavlov: Navision uses ONLY average costing in sales order/invoice. It’s very bad… How to calculate true unit cost amount (FIFO) while creating invoice? P.S.: I think it’s impossible, using NF’s logic. Business Applications Programmer Sertified Navision Developer SIA “Sintegra” Latvia

The Sales line “Unit Cost” is calculated using the “Unit Cost” from the Item table, unless the line is a “Drop Shipment”. Sometimes the Item “Average Cost” is updated from the “Unit Cost” in codeunit 22, so this often reflects the “Unit Cost”, but the “Unit cost” is not updated. Without Landed Costs how could you give anything else but the estimated cost? The Purchase “Invoiced Cost” is not the true cost as it does not include any freight or overheads etc: So we are stuck with the “Unit Cost” from the Item card! The Adjust cost routine updates the Item Ledger Sales Entries “Adjusted Costs” with the Purchase Invoiced Costs but does not update the Sales Shipment or Sales Invoice Lines to reflect these values, so you should be reporting from the Item Ledgers finding the applied entries to get the Invoiced costs, maybe a bit late to look at the profit% here but a good checking point! David Cox MindSource (UK) Limited Navision Solutions Partner Email: Web:

I have written an enhancement to do this but, it is not for the tame of heart. In the nutshell you have to save the item ledger entry no that is posted in cu80 to the sales invoice line associated with it. Then you have to add a function to the adjust cost post cost routine that finds the Sales Invoice Line that has it’s entry no. on it and then adjust the cost at that time. You could then recalculate profit on the new adjusted cost. Bill Benefiel Manager of Information Systems Overhead Door Company (317) 842-7444 ext 117

Cost Amount in Sales Invoice Line is another problem. Why Navision does not includes cost recalculation in stand… hmmm… i know why… Business Applications Programmer Sertified Navision Developer SIA “Sintegra” Latvia

As David Cox already pointed out you need to take freight (transport costs on purchase and sales) as well as custom taxes into consideration. These figures however are usually available. Anyway. I recently read an article about estimation of the true item cost which was very interesting. I quote from my memory: Some companies spend a lot of money to calculate the real purchase costs of items. With appropriate software power they reach a precision of about 90-93% of reality. A good purchase manager reaches (just from his experience) a precision of 87%. After all it becomes clear that you don’t have to do spend much time and money in so called “precise” calculations as an experienced vendor/purchaser reaches almost the same target. After all the merchandise is usually already sold long before you have the true figures about freight and custom taxes. One purchase manager - who was interviewed asked about this astonishing result - simply answered “I would be a bad manager if I wouldn’t know what my items cost”. So what’s the conclusion? No, I don’t want to say that you shouldn’t write software for giving a true picture of reality to your customer. But in modern times where items are held on stock only on very short schedule (imagine meat, vegetables etc.) all calculations will only have historical value. So it’s better to have an account schedule which sumarizes “Sold - purchased - taxes - freight - packing” rather than spending void time in trying to estimate what cannot be estimated. (Just my 2c) ------- With best regards from Switzerland Marcus Fabian

Dear Marcus, Its not the question of simply informing the purchase manager about his costs…if it were to be simple info about costs it shouldnt be a big problem as he is capable of estimating his costs…(as that article suggests) The big question here is the inventory valuation. As you may be aware and as per normally accepted accounting conventions the inventory carrying value should be associated with all costs incurred till the goods reach your warehouse. This includes the freight, customs…blah blah… In Navision the item ledger postings will have only the direct costs and may be the unit cost if you have specified an indirect cost percentage. But in normal circumstanses it is difficult to exactly give a percentage to these indirect expenses. Hence automation of this inventory valuation assumes greater significance than mere information to the purchase manager. I assume that NS 3.00 has some solution to this. Though I have not made a detailed analysis on this item charges!!! Cheers Rohith Kamath Senior Consultant The Naviworld Group

What we are talking about is a landed costs module, where costs can be applied to the Item Ledgers well after they are received or shipped, aportioned by value or weight. These cost would remain connected to the Receipt and Shipment Item ledgers but not affecting the Item ledger Costs as this would upset the G/L when posting costs in periodic activities. The actual Cost of an Item could include Base Cost, freight, storage, dock handling, taxes on the purchase side, then we have “Cost of Sale” the purchase costs plus freight, storage, handling and overheads etc: on the sales side as well if these are absorbed by the company. All these cost will already be in the G/L but not always as cost of sale, IE: overheads & warehousing costs. The application of additional cost could be time consuming and counter productive. you would have a closer cost, but would only be very close on large value small turnover Items. Working out a true cost would be a nightmare! So the “Gross Profit” is just that “Gross” before additonal cost have been applied not “Net”. I did develop such a module for two customers, one will still be using it as they are merchants, the other might not be as the administration might be prohibitive! David Cox MindSource (UK) Limited Navision Solutions Partner Email: Edited by - David Cox on 2001 Aug 16 00:27:03