Understanding Misc Parts & How to Use Them

1. Understanding Misc Parts & How to Use Them Presented by: Derek Kratz

2. What is a Miscellaneous Part Number? Any item number that does not represent a specific item in inventory. They can be used to represent: Misc Services, Sub Contractors, Equipment Charges, Misc Shop Charges, Tools, Misc Material Purchases, etc

3. Is a * prefix required for all Miscellaneous Part Numbers? No but, It makes the Misc parts much easier to find for the users. Allows the users to quickly override the description when necessary on SO’s, Orders, & Jobs. Provides extra layer of protection to make sure Misc parts meant for transactions do NOT inadvertently get received to the warehouse and parts meant for overhead purchases are not accidentally received to transactions.

4. Rules: Allpart numbers belonging to a nonperpetual product group MUST be received to a warehouse. Non * part numbers belonging to a perpetual product group CAN be received to EITHER a warehouse OR a tranaction. Whereas, All* part numbers belonging to a perpetual product group can ONLY be received to an Order, Service Order, or Job

5. What is the difference between Perpetual vsNonperpetual? Contrary to popular belief, this has NOTHING to do with whether or not the qty is tracked through the inventory system. All part numbers, regardless of perpetual or nonperpetualcreate inventory lots when they are received and require valid qty on hand in order to be processed. The ONLY exception is Cost Method 6 parts, which we will discuss later. The real difference is that perpetual part numbers create a journal entry at the time they are received on the PO. Whereas nonperpetual part numbers do NOT create a journal entry at time of receipt. The journal entry is only created when the AP voucher is posted. Non perpetual items are also EXCLUDED by default from the inventory valuation report when you run it.

6. Misc part numbers can be used to post costs to non-inventory expense accounts. Therefore it’s very important that any product group configured to post to ANY other GL account other than the inventory GL account should be set to Nonperpetual. Likewise you should NEVER have a nonperpetual product group configured to post to the inventory GL account.

7. This is very important because the inventory valuation report, which adds up the values of all lots in inventory should match EXACTLY with the value you have in the inventory GL account on the trial balance. If you have perpetual items posting to other GL accounts, then the valuation report total will never match your GL total. Example: Suppose Product group A is configured to post to Shop Supplies GL 6605 and Is perpetual. Product group B is configured to post to inventory GL 1400 and is also perpetual. You receive 10 parts @ $5 from product group A = $50 You receive 10 parts @ $3 from product group B = $30 The total on the inventory valuation report would show $80 but the balance for GL 1400 would only show $30

8. Now that we have learned the rules and understand the differences between * and non-* item numbers and perpetual vs non perpetual product groups, lets look at some examples of how to use Misc parts to achieve special needs.

9. Example 1: Setting up a Misc part for the purpose of billing out misc material from your trucks, using different part numbers to represent different value levels. These parts will NOT be used on purchase orders. You can leave the Inventory GL account on the product group in case any other items are inadvertently linked to this group. Enter 10,000 qty into all warehouses with NO cost.

10. Example 2: Setting up a Misc part for the purpose of purchasing shop supplies on PO and having them expensed to the shop supplies GL account. Enter the shop supplies GL in the Inventory GL account field on the product group. If you have multiple expense accounts you would like to purchase to, set up one product group and one item per group. Each group will represent 1 expense account It’s not necessary to receive qty of this item into the warehouse since it will not be used for billing or transfers.

11. Example 3: Setting up a part that reallocates from an expense account to a direct cost account at the time. Suppose you have want to purchase misc service supplies with one item number and post it into one GL expense account. But when the various parts are used on service orders, you wish to cost out an exact amount for each part. Create a nonperpetual product group and enter the appropriate expense account into the Inventory GL account field. Create 1 item number in this product group to be used for all Misc purchases of supplies. Let’s say this item number is *Service-Supplies

12. Now create a PERPETUAL product group and enter the supply GL account in the Inventory GL account field on the product group. Yes, this is the one exception where you will use a PERPETUAL product group and post to a NON-INVENTORY GL account. When using this setup, it’s critical that you EXCLUDE this product group when running your inventory valuation report. Create the different item numbers you wish to cost out on service orders. For example, lets use *Wire, *Hardware, and *Welding-Rod. To ensure these items DO NOT get used accidentally on purchase orders, set the product type on the item summary tab to “Billing”. Also be sure to check the “Hold Service Price” box so the price you set will hold on the SO.

13. Using inventory receipt, receive in a set qty for each item number and use the cost you want to reallocate for each unit you remove from inventory. BE SURE you create a reason code that uses the inventory GL account so that the inventory receipt will have no net effect on the balance in the inventory GL It’s a good idea to preface these reason codes with ‘Z’ so they sort to the bottom of the list and do not get inadvertently used when doing real inventory adjustments.

14. Journal shows the credit to the 6605 expense account and debit to WIP 1550

15. When the items are invoiced, the cost will post to the material cost account on the bill type by default. If you have a need for them to post to a different cost account, you can specify that cost account on the product group and then check the ‘Service Override’ box. If that checkbox is selected, make sure both the Sale and Cost account reflect the accurate account you wish to post to.

16. Another variation is when you wish to reallocate from an expense account to a service order, but the amount is variable on each transaction. In this case, you will want to create an item number with cost method of 6. This is a special cost method that does not move qty on transactions. Qty is always 1 or -1 and instead you are prompted for a cost to transfer.

17. $125 Cost has been reallocated from shop expense to service WIP. Once invoice is posted, it will come out of WIP and post to whatever cost account you have associated with this bill type or product group.

18. Other common uses of Miscellaneous Parts: -Item numbers for company equipment that will reallocate a cost each time equipment is used on a job or service order. -Creating a product group designated as ‘TOOLS’ and creating in-house part numbers to represent each tool that you supply your technicians with. These can be received in at $0 cost but will remain on the trucks and can be counted as part of their inventory. Also allows for easy transferring of tools back and forth between warehouses. For really expensive tools, you can even serialize the item number and track specific tools throughout the company.

19. For additional information, you can download the Understanding * Star Parts from our support website www.supporttraining.com

20. Questions?