Microsoft Dynamics NAV Prepayments. Prepayments Supportability White Paper

Transcription

1 Microsoft Dynamics NAV Prepayments Prepayments Supportability White Paper Released: January 17, 2013

2 Conditions and Terms of Use Microsoft Confidential This training package content is proprietary and confidential, and is intended only for users described in the training materials. This content and information is provided to you under a Non-Disclosure Agreement and cannot be distributed. Copying or disclosing all or any portion of the content and/or information included in this package is strictly prohibited. The contents of this package are for informational and training purposes only and are provided "as is" without warranty of any kind, whether express or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose, and non-infringement. Training package content, including URL and other Internet Web site references, is subject to change without notice. Because Microsoft must respond to changing market conditions, the content should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information presented after the date of publication. Unless otherwise noted, the companies, organizations, products, domain names, addresses, logos, people, places, and events depicted herein are fictitious, and no association with any real company, organization, product, domain name, address, logo, person, place, or event is intended or should be inferred. Copyright and Trademarks 2013 Microsoft Corporation. All rights reserved. Microsoft may have patents, patent applications, trademarks, copyrights, or other intellectual property rights covering subject matter in this document. Except as expressly provided in written license agreement from Microsoft, the furnishing of this document does not give you any license to these patents, trademarks, copyrights, or other intellectual property. Complying with all applicable copyright laws is the responsibility of the user. Without limiting the rights under copyright, no part of this document may be reproduced, stored in or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording, or otherwise), or for any purpose, without the express written permission of Microsoft Corporation. For more information, see Use of Microsoft Copyrighted Content at Microsoft, Internet Explorer, Outlook, Lync, Microsoft Dynamics and Windows are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. Microsoft products mentioned herein may be either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. All other trademarks are property of their respective owners.

3 About the Authors Author: Bio: Alessandra Pandini Alessandra Pandini is a Senior Support Engineer based out of Milan, Italy. She works on the Finance Team within NAV and has 6 years of experience with Microsoft and 12 with NAV.

4 Table of Contents SUMMARY... 1 Contents PREPAYMENTS WORKFLOW: BASIC PREPAYMENT FEATURES AND SETUP PILLARS... 4 Prepayment Invoices Setup... 8 Setup General Posting Groups... 9 Prepayment Unrealized VAT Creating a Credit Memo for Prepayments ENHANCEMENTS IN PREPAYMENT FUNCTIONALITY SINCE MICROSOFT DYNAMICS NAV 2009 SP KNOWN ISSUES AND LIMITATIONS Prepayment Setup Limitation Prepayment Sale Tax Setup Prepayment VAT Setup Orders with Prepayment Requirement Prepayment is Reducing Credit Limit Order Statistics and Prepayments Order Status Invoice Discounts and Prepayments Change in Quantity After Prepayment Invoice has Been Made Change of VAT Rates May Result in Off Balance Prepayment Deductions Service Orders Prepayment Invoices Posting Prepayment Invoice with Full VAT Setup Compressing Prepayment Settling Prepayment invoices Printing Final Invoices Reference to Paid Prepayments Compressing Prepayments Gross and Net Printout of the Final Invoice Reconciling Prepayment Entries Prepayment Unrealized VAT Reconciliation Prepayments in Receivables and Payables Reports CONCLUSION... 40

5 Version 1.0 Microsoft Dynamics NAV Prepayments Summary This white paper on Prepayments explains the basic functionality of Prepayments feature and details the known issues and limitations of this functionality from a supportability point of view. Contents The following content will be included in the white paper: 1. Prepayments workflow: Sale and Purchase Prepayment Invoices Understand this functionality. 2. Basic Functionality and Setup pillars Understand how to setup this functionality in order to issue prepayment invoices. 3. Enhancements in the Prepayments functionality since Microsoft Dynamics NAV 2009 Learn about all the enhancements that have been implemented in Microsoft Dynamics NAV 2013 since Microsoft Dynamics NAV Known issues and Limitations Learn about the known issues and limitations of this functionality. 5. Conclusion Summary of the things learnt and their purpose. Microsoft Microsoft Confidential 1

6 Prepayments Supportability White Paper Version Prepayments workflow: The cases in which a prepayment invoice is created, what the purpose of this functionality is, how the invoice amounts are posted and how this amount will be reversed in the final invoices is as follows: A sale/purchase order is created and a prepayment invoice is required before executing or receiving it. The prepayment invoice is based on information inserted in the sale/purchase order or as a fixed amount. On posting the prepayment invoice, the prepayment amount is automatically calculated. The user cannot manually modify the content of the prepayment invoice. The prepayment invoice base is posted in designed sale/purchase prepayments accounts. Sale/purchase prepayment invoice VAT is posted according to VAT Posting group setup accounts. When the prepayment amount is cashed in or paid, the order can be shipped or received, and will be ready to be final invoiced. The issued final invoice will include the prepayment invoice base and vat deduction. Prepayment Base is balanced in the sale/purchase prepayment accounts and the total prepayment invoice amount is deducted from the Finance invoice total the receivables/payables account will be posted with the net amount Microsoft Corporation. All rights reserved.

7 Version 1.0 Microsoft Dynamics NAV Prepayments The following example illustrates the flow among accounts in sales side. The purchase side flow is the same, except that the amounts posted have opposite sign. Sale Prepayment Account Sales VAT Account Receivables Debit Credit Debit Credit Debit Credit 1.000,00 (1) 250,00 (1) (1) 1.250,00 (2) (3) 250, ,00 (3a) 1.250,00 (3) ,00 Bank account Sales Debit Credit Debit Credit (1) 1.250, ,00 (3) (1) Prepayment invoice Posting (2) Prepayment amount received (3) Final invoice Posting and prepayment invoice reversal This Function allows the company to automatically manage financial agreements that it has with its customer and vendors. This is because in most of the Countries transaction of money (sending or receiving) is not allowed if a sale or purchase invoice has not been issued or received. Microsoft Microsoft Confidential 3

8 Prepayments Supportability White Paper Version Basic Prepayment Features and Setup Pillars The Prepayment basic functionality and main setup is explained as follows: More: For more information about the functionality, see: Prepayments Training Material The example is made on Sale side, but system covers the Purchase side in the same way. 1. Create a new sale order. The prepayment section is compiled and we will analyze the different fields: Prepayment percentage o Can be manually added on the order header when necessary Microsoft Corporation. All rights reserved.

9 Version 1.0 Microsoft Dynamics NAV Prepayments o Can be automatically filled retrieving it from default prepayment percentage of customer card o The prepayment percentage can be set as combination of customer /item, customer price group/item or all customer Item. Microsoft Microsoft Confidential 5

10 Prepayments Supportability White Paper Version 1.0 o o o o Be aware that Sales Prepayment percentage combination table is prior with respect to the default prepayment percentage set on Customer card. The default prepayment percentage will be used to populate order lines when the sales prepayment percentage customer/item combination is not set. You can also creating a fixed amount prepayment invoice. You can view the total prepayment amount by clicking Order > Statistics Microsoft Corporation. All rights reserved.

11 Version 1.0 Microsoft Dynamics NAV Prepayments o o If you want to adjust the total prepayment amount for the order, you can change the contents of the Prepayment Amount field in the Sales Order Statistics window. If you change the contents of the Prepayment Amount field, the amount will be distributed proportionately between all lines, except those that have 0 in the Prepayment % field. Compress prepayment A check mark in the Compress Prepayment field means lines will be combined on the invoice if: o o They have the same general ledger account for prepayments (as determined by the general posting setup). They have the same dimension combination values. Microsoft Microsoft Confidential 7

12 Prepayments Supportability White Paper Version 1.0 Leave the field blank if you want to specify a prepayment invoice with one line for each sales order line that has a prepayment percentage. Prepmt. Payment Terms Code o o As a default, this code is retrieved from the Payment Terms Code field on the Invoicing FastTab of the order. The prepayment payment terms are used to calculate the due date, payment discount date, and payment discount percentages for prepayment amounts. Prepayment Due Date o o The date the prepayment invoice for the order is due. The date is calculated with the date formula in the Due Date Calculation field related to the prepayment payment term and the Document Date on the order. Prepmt. Payment Discount % o The payment discount percentage that is given on the prepayment if the order is paid on or before the date entered in the Prepmt. Pmt. Discount Date field. Prepmt. Pmt. Prepmt. Payment Discount Date o The last date the prepayment invoice can be paid and still receive a payment discount on the prepayment amount. The date is calculated with the date formula in the Discount Date Calculation field related to the prepayment payment term and the Document Date on the order. Prepayment Invoices Setup Before issuing a Prepayment invoices, the prepayment invoice no. and the prepayment VAT setup have to be prepared. The setup of Number Series for Prepayment Documents can be done for every type of prepayment document that is used (Prepayment sale invoice > Prepayment sale credit memo > Prepayment purchase invoice > Prepayment purchase credit memo). The same number series can be used for Prepayment invoices and credit memos, and regular invoices and credit memos. Alternatively, you can use different number series. When you are using different number series, each number series must be unique so that you can navigate effectively on posted transactions. The number series created for prepayment invoices and credit memos have to be set in the Sale & Receivables Setup table (or Purchase & Payables Setup) section Numbering: Microsoft Corporation. All rights reserved.

13 Version 1.0 Microsoft Dynamics NAV Prepayments Setup General Posting Groups VAT for the prepayment amounts, or in other words, the prepayment invoice, is handled through a combination of the VAT product posting group set up on the general ledger account for prepayment and the VAT business posting group set up on the customer or vendor in the sales or purchase order header. Therefore, a separate general ledger account is required for each VAT product posting group. VAT for the prepayment amounts is NOT handled through the VAT product posting group on the sales order line. In Chart of account, you have to create as many prepayments general ledger accounts as many VAT Product Posting groups have to be managed with Prepayments invoices. Microsoft Microsoft Confidential 9

14 Prepayments Supportability White Paper Version 1.0 The Prepayment General ledger accounts have to added in the General posting Setup with each prepayment account to be inserted in the right general posting setup combination in order to calculate the same VAT percentage on prepayment invoice and regular invoice VAT amount Microsoft Corporation. All rights reserved.

15 Version 1.0 Microsoft Dynamics NAV Prepayments Prepayment Unrealized VAT When unrealized VAT is used, you need different G/L accounts for posting realized and unrealized VAT. To do this, set up these G/L accounts in the VAT Posting Setup window. Prepayments use the Prepayment G/L account s VAT Setup to determine where VAT will be posted. When used with the Prepayment Unrealized VAT check box in the General Ledger Setup window (which is the case in many countries), VAT from the prepayment invoice will be realized once payment is applied to it. Another opportunity to realize VAT from a prepayment invoice is when goods or services on order are delivered. In this case, the posting of the sales order (final invoice posting) realizes the unrealized VAT posted in the prepayment invoice if that invoice is open. If this is not the behavior you want, in the Sales & Receivables Setup window, select Check Prepmt. when Posting. This setting ensures that a prepayment invoice is applied before the final invoice can be posted. Microsoft Microsoft Confidential 11

16 Prepayments Supportability White Paper Version 1.0 Both realized and unrealized transactions are handled through the Prepayments Account Set up in the General Posting Setup window. This makes it very challenging to reconcile VAT Base amounts (which are stored in this single account). This is not a problem for VAT Amount, since realized and unrealized VAT Amounts are posted to different G/L Accounts. The Check Prepmt. When posting field have to be set to avoid shipping goods or services before receiving and posting of the prepayment invoice payment. Creating a Credit Memo for Prepayments You may need to correct an order after posting a prepayment invoice. If you need to increase the prepayment amount, you can change the line prepayment percentage or you can add new lines to the order and issue a new prepayment invoice, but the prepayments lines already posted cannot be deleted or modified. If you need to reduce and correct prepayments, you can: Microsoft Corporation. All rights reserved.

17 Version 1.0 Microsoft Dynamics NAV Prepayments Issue a prepayment credit memo to reverse all invoices prepayments for an order from Action > Posting > Prepayment > Prepayment Credit Memo Notice that the posting of a prepayment credit memo creates a reversal of all posted prepayment invoices. In particular cases, such as a change in quantity or an order that has multiple order lines, this makes it challenging to manage prepayment invoices. Recreate now the correct prepayment invoice. o Reduce the amount in the Line amount field, because for example you need to reduce the quantity on the line. However, you must first increase the prepayment percentage on the line, so that the Prepmt. Line Amount is not decreased below the Prepmt. Amt. Inv. In conclusion, after inserting the required setup and a Prepayment Sales order the system is able to: Issue a prepayment invoice from Actions > Posting > Prepayment button: Microsoft Microsoft Confidential 13

18 Prepayments Supportability White Paper Version 1.0 The order status will automatically change in Pending Prepayments Insert the payment received from the customer Microsoft Corporation. All rights reserved.

19 Version 1.0 Microsoft Dynamics NAV Prepayments The Order status does not change even if the payment has been posted. Ship goods or services and post the Final Invoice o o In one step, ship and invoice from sale order. or In two steps, ship goods from sale order and then post the invoice. The final invoice, in addition to the goods/services sale line, will reverse the prepayment invoice line posted before. Microsoft Microsoft Confidential 15

20 Prepayments Supportability White Paper Version Microsoft Corporation. All rights reserved.

21 Version 1.0 Microsoft Dynamics NAV Prepayments 3. Enhancements in Prepayment Functionality Since Microsoft Dynamics NAV 2009 SP1 The Prepayment functionality design did not change from previous versions. Therefore, in this case, enhancements mean corrections included in NAV 2013 reported for previous versions. The corrections included in the Prepayment functionality that has been implemented in Microsoft Dynamics NAV 2013 since Microsoft Dynamics NAV 2009 SP1 are as follows. Status in sales/purchase orders is not correctly updated o The system allows creating and posting the warehouse shipment, for example, even if it should check that the prepayment invoice is already paid and applied ( ) Error message "Currency Code '' does not exist. " when trying to finalize a sales order where prepayments have been posted (54773) Error in creating Purchase Invoice using Get Receipt Line having Prepayment (233110) Partial posting ends on more prepayment amounts discounted than initially posted in prepayment invoices (235590) Prepmt. Line Amount cannot be 0. in Sales Line Document Type='Order',Document No.='[number]',Line No.='[line number]'" error message when you ship and invoice a sales order that has no prepayment in Microsoft Dynamics NAV 2009 (236612) Posting Date is empty on posted sales/purchase invoice and credit memo lines for prepayment transactions (237676) Error while posting partially received purchase order after prepayment invoice (Unit cost change after partial receipt) (240648) The job number is not included in general ledger entries when you post a final invoice for a purchase order in Microsoft Dynamics NAV 2009 (241783) Not possible to change the ordered quantity when a Prepayment Invoice has been already posted (242526) The Prepayment Amt Excl. VAT field is calculated incorrectly after you change the Prepayment % value in an order ( ) Problem using Prepayments combined with changing exchange rates. The system does not create a gain or loss transaction on posting a final foreign currency invoice if the exchange rate is different from the exchange rate posted in the prepayment invoice (244251) Microsoft Microsoft Confidential 17

22 Prepayments Supportability White Paper Version 1.0 It is possible to decrease the Prepayment % to a lower value than the Prepayment already posted (250839). Poor performance when posting an invoice that involves prepayment (253671) GL entries are appearing with a Source Type = Customer - for Gains/Losses entries Prepayments (254486). Prepayment account does not balance if you use currency with different exchange rate. If you use currency and prepayment after you post the final invoice, the prepayment G/L account not balance for 0.01 (258679). The posted Prepayment Credit Memo VAT amount differs from sale order vat amount (290069). Purchase Invoice for Purchase Order with Prepayment cannot be posted. An error message "Amount must be negative in in Gen. Journal Line Journal Template Name='', Journal Batch Name='', Line No.='0'." appears when a Purchase Invoice is posted. The Purchase Invoice is created using the Get Receipt line functionality for a Purchase order with Prepayment (297396). System returns an error message "Prepmt. Line Amount cannot be XXX." when the partial shipment of Prepaid order is done through Warehouse Shipment. The system return the error message in following circumstances: 100% Prepayment is posted for the Sales Order Partial shipment is used Item is shipped using the functionality Warehouse Shipment ( ) Microsoft Corporation. All rights reserved.

23 Version 1.0 Microsoft Dynamics NAV Prepayments 4. Known Issues and Limitations This chapter will list the known limitations and issue of prepayment functionality. Some of these scenarios would be considered for inclusion in a future redesign of Prepayment functionality, or corrected as bugs. 4.1 Prepayment Setup Limitation Prepayment Sale Tax Setup Prepayment accounts must have a matching tax percentage to the product being sold in Microsoft Dynamics NAV 2013 version. However, in some countries such as United states and Canada, a multi-state customer may have many different combinations of tax jurisdictions and tax groups set up in the tax details table with varying tax rates. Since the prepayment account has to be tightly linked to the tax percentage, the use of Prepayment Sale Tax Setup is limited in case of sales taxes. Prepayment VAT Setup As stated earlier, VAT accounts used in prepayments transactions are set through the prepayment G/L account. The VAT calculation in prepayment invoice and prepayment reversal is made basing on the VAT product posting group of the Prepayment G/L account. Therefore, if you change the VAT Product Posting group on order lines, this change has no impact on the VAT Product Posting Groups, VAT account and VAT percentage used to post the prepayment invoice transactions. The system uses the prepayment account s VAT Posting Setup only. Microsoft Microsoft Confidential 19

24 Prepayments Supportability White Paper Version Orders with Prepayment Requirement Prepayment is Reducing Credit Limit While setting up a credit limit to a customer, the program is calculating the open balance of the prepayment additional to the Outstanding Order amount. This will create a credit limit warning although the credit limit is not utilized. Also, the customer statistic shows a wrong total amount Microsoft Corporation. All rights reserved.

25 Version 1.0 Microsoft Dynamics NAV Prepayments 1. Insert a new customer with credit limit (LCY) 1.000,0. 2. Create a sale order for the new customer and post the 10% prepayment invoice: The customer situation is as follows: Microsoft Microsoft Confidential 21

26 Prepayments Supportability White Paper Version Insert a new order for total amount of GBP 87,50: Microsoft Corporation. All rights reserved.

27 Version 1.0 Microsoft Dynamics NAV Prepayments While calculating the Credit limit, the system sum up the first open order, the issued prepayment invoice and the second sale order. The prepayment invoice should not reduce the customer credit limit. Customer statistics are not correct as well. Recently, a fix (fix ) that solves this issue was released. Order Statistics and Prepayments When selling an item from a sales order, for example, setting a prepayment requirement (on header or lines) skews the profit calculation when you view Sales Order Statistics. This manifests itself, as the posted document statistics is different from the statistics on Sales Order Statistics. If you look at both Posted Prepayment Invoice statistics and Posted Sales Invoice statistics in combination, you can get the correct view of what the profit was in such a transaction. 1. Create a Sales order with Item line type (check Profit % on Item card) and add a prepayment requirement (in header or lines), for example, 20%. 2. On the Action pane, click Statistics. You can see Original Profit %, Original Profit (LCY), and Adjusted Profit (LCY) calculated on the General FastTab. Microsoft Microsoft Confidential 23

28 Prepayments Supportability White Paper Version Post the prepayment invoice. 4. Open the Posted Sales Invoices window, and on the Action pane click Statistics; you can see Original Profit %, which equals 100%, and Original Profit (LCY) and Adjusted Profit (LCY), which are equal to the prepayment invoice total Microsoft Corporation. All rights reserved.

29 Version 1.0 Microsoft Dynamics NAV Prepayments 5. Ship and invoice the sales order. 6. Review the updated Posted Sales Invoice Statistics. You can see that the statistics skews Original Profit % and Original and Adjusted Profit (LCY) equal to prepayment invoice total. Microsoft Microsoft Confidential 25

30 Prepayments Supportability White Paper Version 1.0 When you add Original and Adjusted Profit (LCY) from Posted Sales Invoice Statistics and Posted Prepayment Invoice Statistics, you can get an idea of how much you profited from this transaction; however, Profit % shows the wrong number. Order Status The sale/purchase order status does not change after applying the prepayment invoice payment. When inserting a sale order with Prepayment percentage and the Prepayment invoice issued, the Status of the order automatically changes to Pending Prepayment. After posting and applying the prepayment payment received from customer, the status does not change to Released. In version NAV 2013, fixes have been introduced so that even if the status does not change, it allows the control of document approval workflow and warehouse shipments management easier than previous versions. Nevertheless, the Pending prepayment status have to be change to Released manually Microsoft Corporation. All rights reserved.

31 Version 1.0 Microsoft Dynamics NAV Prepayments Invoice Discounts and Prepayments When Prepayment % is set to 100%, it is expected that the whole amount for the order/line will be paid in advance. Sometimes, such orders are awarded an additional invoice discount, which may turn the receivables amount expected from the order as payable in a way that the total amount posted to receivables/payables amount is negative. Customer and vendor posting routines in Codeunit 11 strictly check for this and cause an error to appear in this situation. A workaround for this error is that you can lower the initial prepayment amount requested. To be able to do this, the posting of a credit memo for prepayment invoice is required. Change in Quantity After Prepayment Invoice has Been Made The ability to exchange the initial quantity on order lines that have a prepayment requirement is disabled after a prepayment invoice is posted. This is done to preserve data consistency throughout the process. However, the ability to change Prepayment % on order lines may lead you to think otherwise because this can be done. One way to work around this is to reopen the sales order and add a new line with the same setup as the line for which the prepayment invoice was posted. In this way, the full prepayment invoice amount is not deducted automatically. To avoid this, you can enable direct posting on the prepayments account and manually create credit memos with G/L Account line with prepayment account and prepayment invoice leftover amount. We consider adding this in a future version of prepayments functionality. An example of how this could work: 1. Create a sales order that has one line of type Item. Set Prepayment % = 10 and Quantity = Post the prepayment invoice. 3. You can ship only 8 of the ordered item, so you offer to ship 2 substitute items (the same item or anything else). Reopen the sales order. 4. Change Qty. to Ship and Qty. to Invoice to 8 in the original order line. 5. Add a new line for the substitute item with Quantity = 2. Microsoft Microsoft Confidential 27

32 Prepayments Supportability White Paper Version Post 7. Create a credit memo and add G/L Account Type line. 8. Find the prepayment account and set it as direct posting G/L Account. 9. Set No. on newly added G/L Account Type line to prepayment account s G/L Account No. 10. Enter the amount remaining to be deducted (from Sales Order line) in Amount field Microsoft Corporation. All rights reserved.

33 Version 1.0 Microsoft Dynamics NAV Prepayments 11. Post credit memo. Note: The credit memo that is used to deduct the remaining prepayment amount will need to contain one G/L Account type line per VAT Product Posting Group to match the VAT Accounts that need to be used for prepayment deduction. Also, note that you can use this approach to use the non-deducted prepayment amount on a different document. However, there is a drawback to this approach you will not be able to delete such an order Change of VAT Rates May Result in Off Balance Prepayment Deductions Changes in VAT rates are a very frequent legal change in multiple countries. Depending on the treatment of prepayments within a country s VAT Rate change legislation, a user may end up in the situation where prepayment handling may require off balance prepayment deductions. This happens when a prepayment invoice is posted in one period, the final invoice is posted in another period, and VAT rates are different for these periods. We recommend that you close as many orders that have a prepayment requirement before the VAT rate change occurs and you run the VAT Rate Change tool to reduce the amount of manual corrections needed to handle such cases. Microsoft Microsoft Confidential 29

34 Prepayments Supportability White Paper Version 1.0 A possible work around if you have issued a prepayment invoice before the VAT rate change and you have to ship and invoice goods or services after the VAT rate change is to add to a final invoice a Full VAT line to cover the difference between the old VAT rate and the new one. Consider to have issued a prepayment invoice for a sale order before the VAT rate change and the VAT rate increased to 27%. Goods have been shipped later than the VAT rate change; hence they have to be invoiced with the new VAT rate, but the VAT rate change tool do not change the sale order VAT Product posting group Microsoft Corporation. All rights reserved.

35 Version 1.0 Microsoft Dynamics NAV Prepayments In the VAT Posting Setup, the Full VAT combinations you require are to be set up. Microsoft Microsoft Confidential 31

36 Prepayments Supportability White Paper Version 1.0 In the final invoice order, you will add a full VAT line which amount will cover the VAT amount difference between the old VAT rate (25% ) and the new one (27%). Post the invoice Microsoft Corporation. All rights reserved.

37 Version 1.0 Microsoft Dynamics NAV Prepayments The item line is invoiced and the prepayment line is reversed with VAT 25%. The VAT amount difference (80,00) covers the difference between the old and the new VAT rate. Microsoft Microsoft Confidential 33

38 Prepayments Supportability White Paper Version 1.0 Service Orders When the prepayments feature was introduced in Microsoft Dynamics NAV 5.0, the Service Management module shared invoicing capability with Sales. In Microsoft Dynamics NAV 5.0 SP1, service management invoicing was separated from Sales and now has its own invoicing. At that time, it was decided to postpone the integration of prepayments with service orders for a later release. As a result, service orders do not have prepayments capabilities. 4.3 Prepayment Invoices Posting Prepayment Invoice with Full VAT Setup Some countries require sending a separate prepayment invoice that covers only the VAT portion (contained in an advance payment) to account for VAT. If the Prepayments G/L account has VAT Posting Setup set to VAT Calculation Type = Full VAT, you will not be able to post such a prepayment invoice. The reason for this is that the standard Full VAT calculation posts only VAT Amount. Prepayment invoice posting requires VAT Base amount (set in the prepayments account in General Posting Setup) since it determines VAT Posting setup to be used when VAT is calculated and posted. Compressing Prepayment When a prepayment invoice is posted with the Compress Prepayments option (which is the default behavior), Microsoft Dynamics NAV groups order lines by Prepayment G/L Account. The legislation of some countries, however, requires that a prepayment invoice contain the list of order line items, which is not an option here. In the case, where the prepayment invoice is not compressed, all lines from the order are transferred to the prepayment invoice as G/L Account line items, descriptions are copied, and quantities set to Microsoft Corporation. All rights reserved.

39 Version 1.0 Microsoft Dynamics NAV Prepayments A prepayment invoice represents a financial only view of order lines, so technically this is correct, as the line type is G/L Account. However, for the user and receiver of the invoice, this is unclear as the printed prepayment invoice may look similar to the following invoice: The quantity in the sales order is 10 and the unit price is 100. The other side of posting a prepayment invoice without the compress prepayments option manifests itself during final invoice posting. More: For more information, see: 4.4 Printing Final Invoices later in this document Microsoft Microsoft Confidential 35

40 Prepayments Supportability White Paper Version 1.0 Settling Prepayment invoices In multiple countries, prepayments are not treated the same way as receivables or payables based on orders without prepayments. The reason is that no shipment or receipt happens when they are posted. For this reason, these prepayments need to be posted to a different G/L account than that of the receivables or payables G/L account. Such transactions, to be correctly reconciled, need to be applied only to dedicated prepayments (advance payments). This kind of application allows the prepayment G/L account to be reconciled easily. Microsoft Dynamics NAV, however, posts prepayments to standard receivables or payables G/L accounts, making it challenging to reconcile them against the G/L. 4.4 Printing Final Invoices Reference to Paid Prepayments Multiple countries require that the final invoice printout, where prepayment was required, specify dates, document numbers, and amounts of prepayments received. Microsoft Dynamics NAV does not provide this information due to a current design limitation. There are a couple of reasons for this: This is usually required for the supply of goods; however, the prepayments feature was originally designed to reflect financial transactions only. As explained in the Prepayments Workflow section, a prepayment invoice is intended to have the same receivable and payable flow as a standard invoice. For this reason, an invoice created during final invoice posting (even though it is related to prepayment invoices) is unaware of any payments applied to prepayment invoices. Accordingly, it cannot show this information on the printed invoice. Compressing Prepayments The printout of the final invoice, for which prepayment invoices were posted without the Compress Prepayment option selected, contains all the prepayment lines. From a prepayments perspective, the final invoice printout provides a recapitulation of all posted prepayment invoices. In a case where multiple prepayment invoices were posted without the Compress Prepayments option selected, the final invoice printout could show a multiple of all order lines. This clutters the overview of prepayment invoices included in the entire process (deducted from final invoice). This is a side effect of posting a prepayment invoice without having the Compress Prepayments option set Microsoft Corporation. All rights reserved.

41 Version 1.0 Microsoft Dynamics NAV Prepayments Gross and Net Printout of the Final Invoice The final invoice printout of VAT is always shown with net amounts and there is no way to change this behavior. The following layout type is not supported: Revenue ,00 +25% VAT 8.500,00 Microsoft Microsoft Confidential 37

42 Prepayments Supportability White Paper Version Amount ,00 - Prepayment 6.800,00-25% VAT 1.700, Amt.incl.VAT ,00 ======================== 4.5 Reconciling Prepayment Entries Prepayment Unrealized VAT Reconciliation If prepayments are used with Prepayments Unrealized VAT, it is challenging to reconcile the VAT Base, since both unrealized and realized prepayments use the Prepayments account More: For more information, see: Prepayments Unrealized VAT 1. In the General Ledger Setup window, select Prepayment Unrealized VAT. 2. On the VAT Posting Setup card, set Unrealized VAT Type to something other than blank, for example, Percentage. 3. Create a sales order with a prepayment requirement. 4. Post the prepayment invoice. 5. Apply a payment to the prepayment invoice. 6. Review the G/L Entries to confirm that VAT was moved from the unrealized to the realized Sales VAT account, but prepayment VAT Base (posted on Sales Prepayment G/L Account) remains posted to same account. Since a dedicated receivables account for prepayments is missing (see Settling Prepayment Invoices for more detail), to see the unsettled prepayment invoice amount in the G/L you sum Sales Prepayment Account and the related VAT account to get this value. You get the same sum if you look at VAT Entries (unrealized base and amount) and at General Ledger Entries. Realizing VAT, by applying a payment to the prepayment invoice, posts the payment amount against the receivables account and moves unrealized VAT from the Unrealized VAT account to the realized VAT Account. After this operation, the same logic for calculating and reconciling unsettled prepayment invoice amount in the general ledger is no longer valid Microsoft Corporation. All rights reserved.

43 Version 1.0 Microsoft Dynamics NAV Prepayments You will no longer get the same sum if you look at VAT Entries (realized base and amount) and at General Ledger Entries. Prepayments in Receivables and Payables Reports Because prepayments are posted to the payables and receivables accounts, Microsoft Dynamics NAV does not distinguish them from regular receivables or payables transactions. In addition, in supply of goods transactions, they are not liabilities/assets because nothing has been shipped or received at this point in time. When you print the Customer/Vendor Entries Due and Customer/Vendor Balance reports, prepayments are included in the reports. For reasons mentioned previously, it is difficult to distinguish open prepayment invoices for which you are expecting payment from ones for which you have received payment and reconcile them against G/L entries. Microsoft Microsoft Confidential 39

44 Prepayments Supportability White Paper Version Conclusion The prepayments feature was designed to create documentation for financial transactions only. The inclusion of scenarios that had more advanced usage of prepayments and related tracking and reconciliation requirements were not all considered or included at the introduction of the feature. For some Microsoft Dynamics NAV customers, the absence of these features may be critical, for others, this absence can be worked around or accepted as is. Users continue to see the advantages of the feature and to ask for more functionality, for example, payments and invoice scheduling, support for more advanced scenarios, reconciling paid prepayments, item dependent VAT calculation and tracking, credit memos for individual prepayment invoices, and so forth. We are aware of the issues these limitations pose for prepayments users and we are planning to redesign the feature in a future release. This paper has given both an overview of the supported scenarios and feature set as well as listed the known limitations. This information is designed to help inform existing and future users of prepayments of the feature s ability to meet company specific requirements for prepayment processes Microsoft Corporation. All rights reserved.