In previous article I talked about revenue deferral functionality in subscription billing module which you can read through this URL
https://musabashraf3.wixsite.com/intellidax/post/subscription-billing-revenue-deferrals
By using subscription billing module we can also manage expense deferrals and create prepaid schedules in D365.
"For this purpose let assume a simple case study where USMF contracted with a company providing cleaning services for USD 12,000 per annum. USMF paid all the amount upfront. for the sake of reporting purpose, USMF want to equally distribute the amount monthly and record expense"
By using dynamics functionality, we will try to record this amount as prepaid expense at the time of PO invoice and then at the end of every month we will run a recognition process to reallocate prepaid expense to cleaning expense.
Step 1: Create Deferral Template
First of all we need to create a deferral template which will help the system to identify the frequency of deferral schedule and number of period for which expense needs to be deferred
Step 2: Items deferred by default
Now we need to setup Item for which we need to create deferral schedule. These items. We can select from following options
· Table (If single Item need to be assigned for deferral)
· Group (If specific item group need to be assigned for deferral)
· Category (If specific category need to be assigned for deferral)
here I'm using a procurement category of cleaning for my example.
Step 3: Deferral defaults
Once it is decided for which item we are going to use deferral, now we need to define the posting profile. Main reason of this step is to dictate the system that in which main accounts the deferral figures need to be recorded.
Now we need to assign the template which we have created earlier.
After this setup is completed, we need to do one final setup in inventory management module to set posting profile for purchase expenditure for expenses
Step 4: Create PO and PO invoice
Once all the setup has been created, now I'll create a PO using my procurement category
confirm the PO and post invoice.
here you can see that invoice line contain a field Deferred with Yes as value (we defined the system that this category is deferral by default)
once invoice posted, we will go to the system and try to understand the entries that system has produced.
Step 5: Deferral schedule.
Once PO invoice posted, system will create deferral schedule for the invoice.
here in the end, we have our deferral schedule, click on it.
Dynamic has fetched the relevant Invoice number and PO number. we can also see that it has automatically created a deferral schedule.
Step 6: Expense recognition process
Now all we need to recognise the expense in the relevant period. for this purpose click on recognise button and new window will open to run recognition process
here we will select our journal and cut-off date and click on view preview
system fetch the relevant line. Click on process and system will post the voucher to transfer prepaid expense to expense.
as we can see that dynamics has recognised the first line.
we can also automate this step by creating batch jobs.
now lets open the journal and see what entries the system has posted
So, the system has reclassified the prepaid expense to expenses.
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