Evo-ERP and DBA Classic Training Session

Evo-ERP and DBA Classic Training Session November 9-11, 2016 Wednesday November 9, 2016 Planning and Production 8:30 9:00 Registration and Introductions 9:00 10:00 Inventory types and Shortage Management 10:00 10:15 Break 10:15 10:45 MRP 10:45 12:00 Work Order Creation and Processing 12:00 1:00 Lunch Break 1:00 2:00 Scheduling, Data Collection and Bar Code 2:00 2:15 Break 2:15-2:45 Manufacturing Defaults 2:45 3:15 Warehouse Control 3:15-3:30 Break 3:30 4:00 Estimating 4:00 4:30 Q & A Inventory Types There are 10 defined Inventory types in Evo-ERP/DBA Classic. Only four of them are actual tangible product F, A, R & M. For all four of the tangible item types, the system maintains a perpetual inventory, tracking on-hand by warehouse location, last and average cost, and book value. There are six item types that are non-tangible items and designed to be used for a specific purpose T, L, B, K, O and N. Types F and A are interchangeable and are for the product that you manufacture. They have Bills of Material and can be components of a BOM. They are generally manufactured on Work Orders but can be purchased. They are also placed as line items on Service type Purchase Orders when sent out to a vendor for processing against an outside processing operation on a routing. Type R parts are purchased components and raw materials. They can not be parent parts on work orders and typically do not have a Bill of Materials but, by changing a default setting, the program can allow a BOM to be defined for Engineering purposes if you are going to purchase a component from a supplier but want to provide the detail for the supplier regarding the lower level components to be used. 1

Type M parts are items manufactured by a vendor from components you provide. Type M parts can be sold or can be components of a BOM for a higher level assembly. By setting a default, they can also be parent parts on a work order so if you sometimes make them in-house and sometimes send them out to a vendor, you can do it without changing the item type if you set the default to allow Work Orders for type M items. A type M part will have a BOM of the components you are providing which can be as simple as an unplated part coming back as a plated part or a complete list of components going to a supplier to be assembled. When a Purchase Order is placed for a type M part, the price entered on the line is the price being paid to the vendor for their service. The BOM components then pull into the purchase order as M (Make From Component) lines with proportional negative quantities and $0 price because as far as the vendor is concerned they do not affect the PO cost. The negative On PO quantities of the components reflect in the reduction of Net Available while they are out at the vendor being processed but they are still included in On Hand. For that reason, some people set the processing vendor up as a segregated inventory warehouse location and transfer the components to that location when the parts go out for processing, removing them from the immediately available production On Hand quantity. The Purchase Order can also be set to pull the component lines from the Vendor location while the finished item is received into the production location. The PO Receiving program deducts the component lines from on-hand inventory, calculates their total cost and adds that to the PO Price on the line for the parent, which determines the total unit cost of the parent which is then added to on-hand inventory. Type T items are the third method of purchasing outside processing such as plating, heat treating or assembly from a vendor, the first two being type M parts or Service Purchase Order for a type A or F part against an outside processing routing operation. A type T item can be purchased and be a component on a BOM. Since it represents the purchase of outside processing of something being made, it should always be purchased against a work order so the cost of the processing is captured as part of the manufacturing cost of the item being made. Type L is Labor. It can be used a number of different ways. If you do not use Routings to track production, you can include a Labor part as a component on a BOM and either pull standard or issue actual labor cost into the work order. You can also sell a type L part if you charge customers for labor, perhaps installation or repair and you can purchase a type L part on a purchase Order if you use contract labor and want to use a Purchase Order to track it. Unit of measure for Type L parts is generally hours. Type B is a phantom assembly. It has a Bill of Materials and is a component of a higher level BOM. It can not be manufactured, sold or purchased and never has an on-hand quantity. It is simply a tool for developing multiple level Bills of Material for engineering purposes that are removed for production, eliminating the need for multiple level work orders. Type K is a Selling Kit and is similar to a type B but for use in Sales Orders. It is a means of simplifying order entry for a group of items that are sold together but not assembled into a finished item using a work order. The type K has a Bill of Materials and when a sales order for the type K is entered, the components are pulled into the order proportionally as line items designated with a line K for Kit Component. When the order is invoiced, the components are pulled from inventory the same as if they had been manually entered into the sales order as lines. Selling Kits and their components can (based on default setting) have the selling price as a lump sum amount for the 2

parent or have the components individually priced. Components can also be included or excluded from printed documents such as Packing Slip, Acknowledgement and Invoice. Type O is used as the node or choice point when using Features and Options. It is a component in a Bill of Materials and I has components. When constructing a Bill of Materials that has selections to be made, the type O part is the designation that there needs to be a selection made from the components listed. For example for a chair manufacturer, within the BOM for a particular chair style, there would be a type O part called FABRIC which in turn had a BOM of all the actual fabric designs available. When the order entry or item configurator encounters the FABRIC part, the user is then prompted to select from the available components. Type N (Non-Inventory) parts are used many different ways. They can be bought, sold, issued to work orders and manufactured but never maintain on-hand quantity or average cost. Purchases of supply type items can use type N part numbers and there is a default to allow Purchase Order Entry to change the GL Account that an item being purchased will post to which can in turn be limited by item type so you could allow changing of the GL expense account for type N parts being purchased for supplies but not hard inventory items. You can also sell type N items so if you need to charge a customer for Engineering or Tooling, you can use type N parts for this purpose. CAUTION: Do NOT use the same generic type N part for purchasing and sales. While a type N part never has an average cost, using it in purchasing will assign it a Last Cost which in turn will be used as the cost of the item if used in subsequent transactions. When creating a type N part in IN-B, several pop up questions appear. First, Is this a Multi-Yield Part? There is an option in work orders called Multi-Yield Work Order which means a single work order can make multiple items. This is useful when multiple parts are nested onto a plate of material for laser cutting (as an example). A type N part is defined as the Multi-Yield placeholder and the work order is created for that part. Material is issued and labor charged as normal, then when Finished Production is performed, the user is prompted to enter the items and quantities made and how to proportion the costs. The second and third prompts relate to the Service and Repair module. If you are going to use the Service and Repair module to perform repairs on customer equipment using components you manufacture rather than repairing your own items, then you need one or more type N parts to track the customer equipment so you would create them, designate Y for Service and Repair and then optionally also indicate that you want to track Make, Model and Serial number associated with each Service and Repair order. This will enable you to track many different brands and models of customer equipment without creating a multitude of different part numbers for them. The third prompt Receive at PO Price relates to the purchase of supplies when using a Standard Cost system. When using Standard Cost, all purchase receipts are received at Standard Cost and the difference between actual and standard posts to a Purchase Price Variance. For inventory, that is appropriate but for supplies, especially when generic item numbers are used for purchasing different supplies, using the PO price is the desired action. Finally, a type N part can be designated as a Surcharge which in turn causes certain actions to take place when invoicing and reporting based on default settings. One default causes releasing a sales order to reprice surcharge lines based on the current base price allowing for price adjustments based 3

on commodity prices at the time of shipment, common when volatile components such as precious metals are involved. Reorder Reports and Shortages A key part of production planning is identifying inventory shortages in a timely manner so that stock can be ordered without having to pay for expediting and air freight. There are a number of different reports and processes that can be used to identify shortages. It is important to understand the benefits and shortcomings of each. However, before we go into that we need to understand how and when the program identifies demand. The Inventory Stock Status as seen in IN-A Inventory Inquiry displays the On Hand (+) which is what is currently on the shelf, On Purchase Order (+) for purchased items ordered but not yet received, In QC (+) for purchased items received but still being inspected, and On Work Order (+) for manufacturing items for which a work order exists. These are the elements of supply. It also shows demand as On Sales Order and On Back Order (-) for customer orders not yet shipped, invoiced and posted in SO-G, and Allocation (-) for requirements for the item in question on the BOM of a work order for a higher level assembly. Forecasted use can also be included here as demand. When a Sales Order is entered for an item, the On Sales Order quantity increases which increases demand and potentially creates a shortage. If the sales order is converted to work order, that creates a corresponding supply eliminating he shortage for the parent and also creating allocations (demand) for components which in turn may be shortages. The Reorder Report at IN-D on the Inventory menu is essentially the same information as the IN- A Stock Status but in a report form listing a range of some or all items. It can be run for all items or shortages only. It considers a Shortage to be anything that shows the Net Available as calculated above to be below the defined Reorder Level (or 0 if no other value has been entered). It does not include the timing of any of the potential future activity such as expected Purchase Order receipt date, Sales Order scheduled ship date or Work Order start or completion dates. It also does not look down through all levels of bills of materials to check for allocations of lower level components so if all levels of the work orders have not yet been created, the program does not see the demand. It does have an option to Exclude Future Supply so it can compare demand to current on-hand stock and show shortages using that logic. The Summary Reorder Report at IN-M also does not look through lower levels of the bills of materials if work orders have not been created but it does take dates into account. It presents 4 monthly buckets of starting on-hand, supply and demand within the month and ending on hand which becomes the starting on hand for the next month. It looks at the current and next three months so at the beginning of the month it is a 120 day outlook and near month end it is more like 90 days. BM-D BOM Availability Report is a what if scenario. What if a customer ordered X quantity of WIDGET123, do we have sufficient components to make them? It does have an option to include multiple BOM levels but it does not stop at a subassembly level if there are already sufficient of the subassembly available and it still checks the components of the subassembly. It also assumes all existing stock of the finished item will be used for the what if case even if there is other demand already in place for it. It considers a component to be a shortage if there is insufficient on-hand to cover existing demand plus the what-if quantity. Future supply is ignored. 4

BM-N BOM Availability Tree View is a display of the Bill of Material in a tree format looking at existing requirements and also potentially a what if quantity as in BM-D. In this view, items with sufficient supply are displayed as green, shortages in red. There is an option to Include or Ignore future supply when defining a shortage. There is a third option, Display future supply which shows an item as blue if there is currently insufficient on hand stock for the requirement but orders have been placed for sufficient quantity to cover it. MRP Overview All the programs listed above have one major shortcoming. If all the work orders for all the lower level subassemblies of all requirements have not been generated, the allocations for those lower level components do not exist and demand will be understated. If you create all the subassembly work orders when the parent work order is generated then it is not a problem but it is something you do need to understand. MRP is the only way to see through all the BOM levels and identify demand before the work orders for all levels have been created. There are several elements of data that need to be accurate before MRP will be anything more than garbage in, garbage out. First, the on-hand inventory levels need to be accurate and maintained as such by the proper processing of Sales, Purchase and Work Orders. Second, Bills of Material must be accurate so demand for top level items drives down correctly to component demand. Third, lead times for components at each level must be at least reasonable so the order placement can be backed from the requirement date allowing time for the items to arrive. Finally, the Sales Order estimated ship dates, Purchase Order estimated receipt dates and Work Order estimated start and finish dates must be accurate and maintained for accuracy if things get rescheduled (as is inevitably the case). If Forecasts are used, they must be reset or consumed as orders are entered. MRP Parameters must also be established and understood. Lead Time was mentioned above. For purchased items, the lead time is the number of calendar days between order placement and receipt and for manufactured items it is the number of work days (taking the shop calendar into account) to manufacture a typical run size of an item. Reorder Level is the safety stock level that, when reached, the program will suggest a Make or Buy action backdated by the lead time so the safety stock level is never actually reached. Reorder Amount is the minimum order quantity. It can also be supplemented by the Standard Pack which can be used as the order increment. Expedite Buffer is the most critical of the Expedite/Delay settings in that if it is too small, you will be directed to make or buy items that already have orders in place that need to be expedited. When demand exceeds supply for an item, the program looks into the future the number of days specified as the Expedite Buffer to see if there is a future order that could be expedited. If there is not, it will suggest a new Make or Buy action. If there is, it will suggest the existing order be expedited. For example, if a shortage occurs on March 1st and the expedite buffer is set for 20days and the shortage is met by a purchase order arriving March 19th, then the system will not issue a BUY action (suggested purchase order) and will instead issue an EXPEDITE message. If, on the other hand, the purchase order was due to arrive March 21st, it would fall outside the expedite buffer and the MRP program will assume it is designated for a later requirement. It will then issue a BUY action anda recommended PO quantity and order date. Expedite Sensitivity defines the number of days late an order is allowed to be (compared to the need date) without suggesting an action. Most material requirements dates are loosely planned, meaning that they are not so precise that an item arriving one or even a few days late actually needs attention. You can reduce these unnecessary EXPEDITE messages through use of the Expedite Sensitivity setting. Any requirement whose number of days late is equal to or less than the Expedite Sensitivity number of days will not receive an EXPEDITE message on any reports. 5

Delay Buffer is the number of days early a product can arrive and be recognized as destined for that requirement. Anything arriving early but with a demand requirement within the Delay Buffer will get a Delay action, indicating that it is coming in before it is needed (and therefore you are paying for it before it is needed) but the need is recognized. If there is no requirement within the Delay Buffer days, the program will generate a Review action because there is no recognized need for the product. Delay Sensitivity defines the number of days early an order is allowed to be (compared to the need date) without suggesting an action. If you are not worried about orders coming in early so long as there is a need recognized for them, you should set the Delay Buffer and Delay Sensitivity to the same value. Entering and Consuming Forecast Forecasts are used to enter anticipated demand before sales orders are actually received. If you are going to enter forecasted demand at MR-A, you need to enter the item, quantity and date or import from a text (CSV or Fixed Length) file and then you need to somehow consume it. There is a default setting to have either order entry (SO-A) or invoice posting (SO-G) consume forecast. If you use the Order Entry option, the Estimated Ship Date for each line entered in SO-A is used to match the month of the forecast and the forecast quantity is consumed down to a zero balance for the month. If the forecast is higher than the orders actually received, you need to use MR-C and manually clear the balance at month end. If you use the Invoice posting option, then the dates are not used and the forecast for the item is consumed using FIFO logic. If you do not enable either of the defaults, then you need to use MR-C to consume the forecast. MR-C can Consume, Erase or Rollover the forecast. Consume reduces the forecast by sales orders with estimated ship dates in the same month so it works the same as the default setting to automatically reduce as orders are entered. Erase is simply that, delete the forecast for the specified period. Rollover advances the forecast 30 days, effectively moving it ahead a month. MRP Execution and Reports The actual execution of MRP is simple. Run MR-F and indicate whether Sales Orders and Forecasts should be included (typically Y). If you have blanket orders out in the future that you do not want to consider as active demand, set the Estimated Ship Date Through out as far as the planning horizon you want to consider. If you have orders in-house with Bills of Materials still in Engineering and Scheduled (Status S) work orders for them in place, you can opt to include them and the demand will be included to the extent the BOM has been defined. Nontangible items (type N, L, T) can be included if you want visibility of their demand. Standard Pack can be used as an increment of quantity for Make, Buy or both and Reorder Level can be considered or ignored. Once the MRP has been generated, the interpretation of the reports can be more challenging. Keep in mind that every existing or planned work order will have its components provided for, generating more planned work orders for subassemblies and Buy requirements for purchased components so the first thing that must be done is to ensure that all the Make (Planned Work Order) requirements are valid. If you are getting Make requirements for items that already have Work Orders created, most likely the sales or work order dates have changed and the supply is not within the expedite buffer of the demand so the supply is being ignored and an additional Make is generated. MR-H (Order Action Report) for M (Make) action should be run and verified that all the Make actions are valid. If you convert sales orders to work orders and create lower level assembly work orders as part of that 6

process, there should never be any Make requirements in MRP unless you have Reorder levels defined for manufactured items. Once you have determined that any Make requirements are valid, you can look at the Buy and Expedite actions. Again, if Expedite buffers are too small you may have Buy requirements for items that are already on Purchase Order but the estimated receipt date is outside the expedite buffer after the required date. Particularly when just beginning to use MRP, you should not blindly us the MR-H report without looking at the detail behind it which can be seen in MR-G, especially for something that doesn t look right. You can either use the Make and Buy reports and manually generate Work Orders and Purchase Orders, or you can have the program generate them for you. The Purchase Order generation is a bit more robust than the Work Order generation. You can group purchases by date buckets and within those buckets the program will automatically group requirements for the same item into a single PO line and then combine items for the same primary vendor to a single PO. You can also opt to generate a report for review rather than actually create the Purchase Orders or review the Purchase Orders as they are generated to potentially edit the vendor and quantity. There is a default setting you can turn on for MRP generation that will combine requirements for the same item within a specified date range up to a specified value into a single requirement, so you have a single Buy that covers multiple requirements. Work Order creation, on the other hand, is a one to one process. There is not a way to have the program automatically combine multiple requirements for the same item within a date range into a single work order. If you are a Make to Stock operation, you can use Reorder levels to accomplish this, or use the MR-H report for Make actions and manually do the combining and create work orders. Other Methods for Purchase Order Creation In addition to using MRP or manually generating Purchase Orders after looking at various shortage reports, there are other methods available for generating Purchase Orders. In all cases (including MRP) if you want the system to generate the purchase orders automatically, you need to have a Primary Vendor assigned to the items in IN-B. IN-D Reorder Report If you run the Reorder Report for only Type R parts and Below Reorder Level Only, you will be able to then automatically generate Purchase Orders for these results. Convert Sales Order to Purchase Order If you buy and resell, we have a program to convert Sales Orders to Purchase Orders. It has an option to use the total line quantity or backorder quantity only if you want to cover shortages. Like MRP, it can automatically generate or allow review. It will make a single PO per vendor but each sales order will have a separate line with the sales order number in the Work Order prefix field so there is a cross reference back to the sales order. PO-B has a Print Consolidated option so the vendor doesn t see the detail of multiple lines for the same item. Convert Work Order to Purchase Order Similar to the Convert Sales Order to Purchase Order, we have a program to generate Purchase Orders for the Type R components on a range of Work Orders. Like MRP, it can automatically generate or allow review. It will make a single PO per vendor but each work order will have a separate line with the work order number on the line so it will be issued to the work order upon receipt. PO-B has a Print Consolidated option so the vendor doesn t see the detail of multiple lines for the same item. There is an option to issue existing stock from inventory first and 7

only place Purchase Orders for shortages and also an option to first look for existing stock Purchase Orders for the same team and assign the stock line to the Work Order for the quantity needed. Other Methods for Work Order Creation In addition to MRP and manual creation of Work Orders individually there are other methods of Work Order creation SO-N Convert Sales Order to Work Order SO-N can convert one or a range of Sales Order to Work Orders. If you prompt for Work Order quantity, you will see the stock status for each item and determine how many to put on the Work Order. There is also an option to include backorder quantities or to only convert backorders if you only need to make enough to cover shortages. There is also an option to only convert lines not yet converted which can be used if additional lines are added to a previously converted order and you can opt to create Multi-Assembly Work Orders which will run WO-K-D (see below). The Sales Order number is used as the Work Order prefix and the suffix is incremented by the value specified. Due date is matched to the Sales Order line. Start date is either entered manually, calculated using the item s lead time, or calculated using backwards lead time scheduling, depending on defaults and screen selections. ES-E Convert Estimates ES-E will create Work Orders for all levels of the Bill of Materials as defined in the estimate rather than the standard Bill of Material for an item. If the Item (at any level) does not exist in the production inventory, it will be added and the Estimating Bill of Material and Routing will also be added to the production database. WO-K-C Create Multi-Date Work Orders If multiple dates and quantities have been entered in WO-A and no costs have yet been posted to the Work Order then WO-K-C can be used to split a single Work Order into multiple Work Orders for the dates and quantities specified. WO-K-D Create Multi-Assembly Work Orders WO-K-D can be used to create subassembly Work Orders for all or some of the lower level components of a top level assembly. If you enter the top level Work Order prefix and suffix in the from/through Work Order then the program will go through the Bill of Materials of that Work Order, create Work Orders for any type A or F components and stop. If you leave the suffix from/through blank, or enter 1 through 999 then it will create the Work Orders for the first level, then loop back through the Work Orders it just created and generate their components and so on through all the levels of the BOM or limited to the number of levels specified. You can also control which Work Orders are generated by the various prompts regarding the quantity to create based on stock levels, reorder levels and reorder amount. WO-K-L Quick Work Order WO-K-L can be used to create multiple Work Orders for a typed in or imported list of parts and quantities. The status indicated on the program determines what the Work Order status will be once it is created. If a status of C is indicated then the Work Order will be created, materials backflushed, finished production posted to stock and closed. Otherwise, open Work Orders will be created with the status indicated. Work Order Material Processing WO-G Issue Materials Materials can be issued using WO-G three different ways: Kit, List or Individual entry. In the case of a Kit issue, the assembly quantity is entered and sufficient quantity of each component is pulled regardless of stock levels, then a shortage report can be printed to see 8

what went negative on-hand. If an item is on a PO that is associated with the Work Order in question, the item will be skipped. In the case of List, again the assembly quantity is entered and the components are pulled based on the BOM quantity but only up to the available on-hand inventory. It also checks not only for items on PO but the quantity on PO and pulls stock if it is available and the PO is not for the total required quantity. In the case of individual entry, the BOM is presented but the quantity suggested for each component is 0 and the user needs to enter the quantity for each component. Components not currently on the BOM can also be added and issued using any of these methods. HH-C Issue Materials (Hand-Held version) HH-C is designed for individual material issues using a hand held bar code scanning device. The Work Order number is scanned, then component part numbers, quantity is entered and, if Lot, Serial and/or Bin Control is enabled, that information is scanned as well. There are default settings that allow for a Kit issue and a password controlled option for preventing issuing a component that is not on the BOM. Backflush at Enter Labor If the default is turned on to backflush materials at Enter Labor then BOM components need to be associated with routing sequences. When quantity complete is reported against a sequence using WO-F, DC-A or B or WO-M, the program will pull the quantity of components needed based on the sequence and parent quantity completed. The default can also be set to B for Balance Required, in which case only the remaining quantity per component for the quantity of parents completed will be pulled. Backflush at Enter Finished Production Finished production backflushing default can be set to N (Never), A (Always, do not ask), Y (Yes, but ask, WO-I only), or B (Balance required). If the default is Y, WO-I will ask. For WO-P and HH-D, Y and A default settings always backflush.backflushing will pull the quantity of components required regardless of stock levels, then prompt to print a shortage report of items with negative on-hand. Purchase Receipt to Work Order- If a Work Order number is entered on the line item of a purchase order then PO-C or PO-J-C will receive directly to the work order, bypassing the need to issue the material manually. WO-K-I Kitting System WO-K-I was designed to use a wireless tablet for pulling materials. The Work Order and Employee number are entered, the BOM is displayed and the employee goes through the stockroom pulling components. This data is posted to a temporary file, then reviewed by a supervisor or inventory control person, then posted using Edit and Post Material Issues, DE-K-B. Work Order Labor Processing Standard Labor If you simply want to absorb a standard amount of labor into Work Orders, create a Labor (Type L) part number, give it a unit of measure of HR (Hour) and a standard labor and overhead cost corresponding to the rate you want to charge. Add this item to the BOMs using the appropriate quantity (hours per part for all labor operations) and kit issues and backflushing will pull the standard labor. If you have routings and labor standards defined and want to post standard labor without actually reporting production against each sequence there is a default setting for Finished Production to post Standard Labor for Employee#. If an employee number is entered in the default, then WO-I will 9

post the standard amount of labor for each operation to the work order based on the quantity of parts completed. If you set a routing operation to Std Labor Y then when you report parts complete against the operation in WO-F you will not be able to enter a time and WO-M will allow entry of start and finish times but they will be ignored and the time will be calculated based on the standard time and quantity reported complete against the operation. Similarly, Data Collection will calculate the Run Time based on the standard time and quantity of parts. Actual Labor If you only want to report hours and are not concerned with who did the work or what operation it was, you can have employees document total hours on a work order and then, before processing Finished Production, issue the total number of hours as a Labor part issue in WO-G. If you want labor per operation, then you either need to have employees clock into and out of Work Order operations using Data Collection or fill out time sheets containing Employee number, Work Order, Operation, Run versus Setup, Time spent, good parts completed and scrap parts completed, then somebody needs to enter the data using WO-F or enter using WO-M and post using WO-N in a timely manner so that Finished Production costs reflect the labor. Entering parts complete per operation also gives you visibility as to the production status as parts are completed and advance to the next operation. Scheduling Several different scheduling options are available and can be used in conjunction with one another with the exception of Finite Scheduling. Finite scheduling requires that Work Centers be set up differently than the other methods so it can t be combined with other methods of scheduling. Unless Lead Time is enabled by default, when a Work Order is created, every operation has the same start and finish date as the work order itself. They will not be rescheduled into sequential dates unless one of the scheduling options is used. The available options are: Finite Scheduling Can only be run as forward scheduling which means the scheduled work order completion date will change based on the work center capacity and work order priorities. It does take capacity into account but it does not manage any sort of dependent scheduling meaning it does not consider component or subassembly availability when scheduling a work order. Infinite Scheduling Simply parses the operation start and completion dates into proportional portions (based on the time standard per operation) of the available days. The Work Order Start and Finish date will not change. If any outside processing operations exist that have a total lead time that takes up more than the duration of the work order, the program will not update the routing operations and generate an exception report. Lead Time Scheduling This is the only method that can be run either forward (calculate a finish date) or backwards (calculate a start date. When run backwards it can also perform dependent scheduling of subassemblies based on the start date of the parent work order. Lead Time scheduling calculates the duration of each operation based on the quantity on the work order, time standard plus any overlap and work center queue time. This method (either forward or backward) can be set as the default to use when work orders are created. 10

Visual Scheduling The visual scheduler presents either a view of all work orders in a given Work Center or an overall view of all work orders. Work orders or operations can be dragged to the past or future. When moving operations, prior or subsequent operations are pushed as well, keeping them sequential. Data Collection Data Collection is one of the ways labor and production can be entered into the system. For less than $100, you can get a USB bar code scanner and enable bar coded data collection. The shop traveler already prints the work order and operation numbers as bar code. Based on default settings, the labor and/or quantity complete can be posted to the work order real time or reviewed by a supervisor and batch posted. Bar Code Labels Any of the places that labels can be printed, information on the label can be barcoded. This includes stockroom inventory labels, Purchase Order receipt labels and Work Order labels, potentially also bar coding Lot and Serial numbers as well as shipping labels which can bar code specific information required by a customer. 2D QR type bar codes can also be assigned to items and print on inventory labels and various forms such as Packing Slip or Invoice. Hand Held Scanners The Evo-ERP Hand Held programs consist of a number of programs that can be run using either a full Evo-ERP license or a reduced price Data Collection license. The DC License is limited to the programs available on the Hand Held module menu on the ADMIN menu and, if you purchase the lower price license, the user must log into Evo using the Data Collection menu. To set up the DC menu on a workstation, load Evo-ERP on the workstation, go to System Manager, UT-A, program EVODCSETUP. The program will run a Workstation setup program and generate an icon called EvoDC Local. If you launch the program using that menu, you will see that rather than the full Evo-ERP menu, a small screen menu will load. You can control which programs are available by editing the user menu and removing programs from the Hand Held module. This is the only module available to the DC menu. The limited DC licenses can also load DC-A, B and C by logging into the full Evo-ERP menu using a username of D.C. and password LABOR. Even if you are using a full screen, the programs on the DC menu load a small screen version designed for the portable computers. Warehouse Control Enabling Warehouse Control turns on the ability to assign an item to more than one Bin Location in one or more warehouses. There are 3 levels of Warehouse Control: None, Y meaning multiple bins are allowed so you can see what bins might contain a particular item, and Q meaning the Quantity per Bin per Warehouse is tracked. Once it is enabled at a master level, a lower level can be assigned by Warehouse or by Item. 11

To first turn on Warehouse Control, you need to use SD-Q to set Warehouse Control to Y or Q, determine whether to used controlled Bin Locations (selected from a preset master list) and indicate whether an unspecified Bin Location is allowed. Next, go to WC-A to create the master list of Bins (or they can be imported using WC-C), WC-B to further assign Y or Q control settings by Part and by Warehouse Location which can be done individually or by ranges, and finally WC-C to assign Bins and on hand quantity per Bin to items (this can be imported). Once WC is enabled, you will be prompted to enter a Bin location each time parts are moved into or out of inventory. Estimating The Estimating module can be used to generate a Quotation for a customer when the underlying cost of the product is unknown and a cost rollup is required to determine the cost, then apply margins to come up with a selling price. Once the quote is accepted by the customer, the Estimate can be converted to a Sales Order and/or Work order. The Estimating module in Evo uses a separate Inventory, BOM and Routing database as compared to the production data. New items can be created for an estimate without adding them to the production database until an order is received. In addition, in the Estimating module, an item can have multiple Routings and Bills of Materials which can be copied from Production or other Estimates. 12

Thursday November 10, 2016 Follow the Money 8:30 9:00 Inventory Costing Methods 9:00 9:30 Inventory Types and the Effect on Cost 9:30 9:45 Break 9:45-10:00 Transaction Timing and Book Value 10:00 10:15 Unit of Measure Conversions 10:15-10:45 Item Class and Warehouse Locations 10:45-11:00 Break 11:00 11:30 Physical Inventory and Cycle Counting 11:30 12:00 Job Cost Reports 12:00 1:00 Lunch Break 1:00 1:30 Inventory to GL Reconciliations 1:30 2:00 Advance Payments and Deposits 2:00 2:15 Break 2:15-2:45 Payables, Receivables and Cash 2:45 3:15 Accounting Dates and Defaults 3:15-3:30 Break 3:30 4:00 Month and Year End Procedures and Accounting Utilities 4:00 4:30 Q & A Inventory Costing Methods Evo-ERP and DBA Classic support four costing methods: Average, Standard, FIFO and LIFO. If you are using Average Costing (which is the system default when a new system is installed) the inventory is valued at the weighted average of on-hand stock. When items are received into inventory from any source, the average cost is recalculated by the weighted average of on-hand stock and average stock prior to the receipt and the quantity and cost being received. All shipments or issues of material from stock use the average cost at the time of the transaction. If you change from Average to Standard costing, the conversion process revalues inventory to the current standard (resulting in an accounting entry that must be made to book the change in value). Going forward, all receipts occur at standard cost. If the price on a Purchase Order differs from the standard, the inventory is received at standard and the difference is posted as a Type C Price Change transaction and posts to the GL Account designated as Purchase Price Variance. Work Orders are also received to stock at standard cost and when the work order is closed, any difference between the actual costs posted into the work order and the standard cost of finished goods taken out will post to WIP Variance resulting in net $0 WIP in the closed Work Order. Positive Adjustments are also only posted as standard cost. Transactions removing stock from inventory use Average cost but since all transactions going into stock use standard cost, the average and standard are the same. When standard costs are updated periodically, you must choose whether to revalue existing inventory at the new standard or retain existing stock at the old standard and begin receiving new stock at the new standard resulting in a blended average stock value. FIFO (First In-First Out) and LIFO (Last In-First Out) use the same basic logic. All receipts into inventory create a bucket defining date, quantity and cost. Transactions that remove stock from inventory deplete the buckets in order, either starting from the oldest or newest. Average cost is recalculated based on what is left but is only used as a reference when using either of these 13

methods. It is particularly important when using LIFO or FIFO costing method that you enforce strict procedural methods to prevent inventory from going negative. Inventory Types and Costing The costing methods described above apply to the 4 inventory types that actually are tangible and maintain an on-hand quantity: R, F, A & M. Under Standard Costing, they are always received into stock at Standard cost. Under the other methods, Type R parts get their cost from the Purchase Order. Type M parts are a rollup of the PO price for the processing and the component cost (Average, FIFO or LIFO depending on costing method). Type A and F parts get their cost from Work Order Finished Production and either the Work Order Defaults or the way the questions are answered in WO-I. 1. Use Standard Cost - there is a choice on the screen to use Standard Cost. If you say Y, then the parts will go into stock at current Standard Cost of the parent part regardless of the actual cost in the Work Order. 2. No to Standard cost, Say Y to Is this the final receipt for this WO? All cost in the Work Order minus any previous receipts will be divided by the quantity made & zero out the cost in the WO. 3. No to Standard cost, N to Is this the final receipt for this WO?. The cost in the WO will be prorated between the finished parts and the balance on the order to calculate a unit cost. This is done on a component by component and Sequence by sequence projection to 100% complete based on costs and % complete thus far, then divided back by the WO quantity to arrive at a unit cost. Any component or sequence with zero cost reported will be projected based on the estimated cost. This algorithm is obviously quite susceptible to labor, quantity complete by sequence and material reporting and is perhaps the worst culprit of Garbage in, Garbage out. 4. Regardless how you answer any of the questions, you can override the calculated cost and manually enter a value. When you close the work order, the program will post any residual costs to the WIP Variance account and zero out the balance in WIP on the Work Order. All residual costs post to the variance, not just overhead or any other specific type. It is the difference between total cost in and finished production out. If it is a few pennies, it is rounding differences; if it is a larger amount, then Finished Production is not accurately reflecting what it actually cost to manufacture the parts. Perhaps standards are inaccurate. The other types never maintain an average cost and follow different rules: Type N parts can be given a standard cost and, if they have one, transactions taking them from stock will use the standard cost. Transactions putting them into stock will use the cost specified (such as the PO price for a PO receipt) which then becomes the Last Cost for the item which will be used for transactions coming out of stock if the standard cost is 0. Consequently, if you use a generic type N part such as TOOLING you need to make sure you don t use the same part for Purchasing and Sales because the Purchasing cost will become the Last Cost and ultimately COGS for something completely different. 14

Type L parts are generally used for issuing labor to work orders if Routings are not being used. They would typically be given a standard cost for labor and overhead which would then be the cost used for Work Order Labor. Type T parts are generally only used for the purchase of outside processing for a work order. They can be given a standard cost to be used during the standard cost rollup but actual cost posting to a work order will be the cost on the purchase order unless standard costing is the default method. Type K parts can have a standard cost based on the rollup of components but shipment of a Kit does not pull a cost. The invoice cost pulls from the associated components. Types B and O items do not ever have transactions in their own right so will never actually transact a cost. Transaction Timing The timing of transactions has a potential impact on the cost of subsequent transactions. In general, transactions should be entered into the system in the sequence of actual events. Work Order Finished Production should be performed prior to shipment invoice posting, labor and material issues to the work order must be done prior to Finished Production and PO Receipt must be done prior to materials being issued to the work orders. If transactions are processed out of order, the cost associated with the transaction will not accurately reflect the true item cost. The volatility of your product mix will determine the severity of the variance. If you are repeatedly making and selling the same items and component costs don t fluctuate much, the impact is less than if you are constantly making new things and/or use components that have volatile costs such as precious metals. Book Value In theory, if your inventory never goes negative, Book Value will be the total value based on on-hand times unit average cost and it can be reset as such in UT-K-G. However, as parts are received in and issued or shipped out, the Book Value will always increase or decrease in an amount equal to the total transaction amount. The unit average cost, however, will be reset to the current transaction unit cost if a transaction causes a negative on-hand to recover to positive which may result in Book Value not equal to On-Hand times unit cost. Consider the following: 10 units on hand @ $1.00 each. Book Value=$10.00 Ship 20 units, total transaction processes at -$20-10 units on hand @ $1.00 each, Book Value = -$10.00 Receive 20 units @ $2.00 each, total transaction value is +$40 +10 Units on hand @ $2.00 each but now Book Value= $30 (-10 + 40) If you change unit cost in IN-K without changing quantity, there is no change in Book Value because no parts moved; this is another means by which book value can become different from actual stock status, although the current version of the program does not allow the cost to be changed if there is any on hand inventory. Finally, if you receive parts to stock on a purchase order, sell or use them, then enter the vendor invoice at a different price, the price change for the total quantity of parts will adjust Book Value but the unit cost adjustment will only affect the balance of the items remaining in stock. 15

Unit of Measure Conversion If the Stock and Purchase Unit of Measure for an item are different, the Purchase Order price will be multiplied by a conversion factor during receiving to calculate the unit average cost. There are two different ways this can be done and the calculation is different. There are some Purchase Units of Measure that are preprogrammed into the system and use built in conversion factors listed below. Since these use embedded factors the PO line will not show quantity times price equals extension. M = per thousand. (PO quantity)/1000 x (PO price) H or C = per 100. (PO quantity)/100 x (PO price) LOT = lot charge. Prices the item on a lot charge (flat fee), regardless of quantity. LB = per pound. (PO quantity) x (value in the inventory Weight field) x (PO price) CWT = per 100 weight. (PO quantity) x (value in the inventory Weight field)/100 x (PO price) SF = per square foot. (PO quantity) x (value in the inventory Foot Factor field) x (PO price) MSF = per 1000 square feet. (PO quantity) x (value in the inventory Foot Factor field)/1000 x (PO price) BF = per board foot. (PO quantity) x (value in the inventory Foot Factor field) x (PO price) MBF = per 1000 board foot. (PO quantity) x (value in the inventory Foot Factor field)/1000 x (PO price) LF = per linear foot. (PO quantity) x (value in the inventory Foot Factor field) x (PO price) CLF = per 100 linear feet. (PO quantity) x (value in the inventory Foot Factor field)/100 x (PO price) MLF = per 1000 linear feet. (PO quantity) x (value in the inventory Foot Factor field)/1000 x (PO price) For Purchasing Units of Measure different from the stock Unit of Measure and not listed above, the PO Conversion Factor needs to be defined. In this case, the Purchase Order line will show Quantity times price equals extension and the conversion factor is used at PO Receiving. Item Class and Warehouse Location GL Account Posting of inventory related transactions is controlled by the Item Class of the item being processed and the Warehouse Location assigned to the transaction as entered in the sales, purchase or work order. Master default accounts for the Asset, COGS, Taxable and Non-Taxable Sales, WIP, and absorbed labor and overhead are defined in AD-A General Ledger Defaults, and then further refined by Item Class and Location in SM-C. It is important to realize that both the Class and Location come into play. If you create a new Warehouse Location and do not define the posting by Item Class, the AD-A master defaults will be used. There is also a setting in the Customer master for a Sales account. If one is specified, all sales to that customer will post to that account and the Item Class setting will be ignored. When an item is purchased, the Asset/Expense account as defined by the Item Class plus Purchase Order Location is debited. When a Work Order is created to manufacture an item, the labor and materials issued to the Work Order are debited to the Work in Process account defined by the Product Class of the parent part plus Location of the Work Order and the component Asset and absorbed labor and overhead accounts will be credited. 16

When a part has been manufactured on a Work Order, Enter Finished Production credits Work in Process and debits the Asset account defined by the Product Class of the part manufactured on the Work Order. When a sales invoice is posted for an item, the Sales or Non-taxable Sales account is credited based on whether the line item on the invoice is taxable or not. The Asset account is credited and a corresponding debit is made to the Cost of Goods account. If an item is both used in a Bill of Materials for a higher level assembly and sold by itself, the Sales and Cost of Goods accounts used are based on the actual item listed on the invoice. If the component is being sold, then its Sales and Cost of Goods accounts will be posted to. If the higher level assembly is being sold, then it has absorbed the cost of the component into its total cost and the sale transaction will post based on the product class of the assembly. All expense items such as Shop and Office Supplies that are bought on a Purchase Order must have a part number in the inventory file and an associated product class. The Asset/Expense account should be the expense account the costs should be debited to. The same expense account can be used to complete the Account field for the other accounts for the product class since expense items are not sold, or the Clearing account can be used so that any inappropriate use of an item belonging to an expense class is immediately identified. It is particularly important that expense items be identified as type N (Non-Inventory)and conversely that any type N items not belong to an item class that will post to the Inventory asset account to maintain a balance between the GL balance in the inventory account and the subsidiary Inventory balance as seen in the IN-F Inventory Value Report. Physical Inventory Process The Physical Inventory Module allows you to take a complete or partial physical count of inventory without shutting the manufacturing plant down for the days (or weeks) needed to enter and evaluate the counts and inventory value. Once the inventory is frozen and counts made, unless you are using FIFO or LIFO costing and need to maintain accuracy of FIFO or LIFO layers, all other inventory related functions can return to work and transactions can be processed. Once counts are finalized, the Update Physical Inventory program posts adjustments based on the difference between the frozen and counted quantities regardless of what activity may have transpired since. Before running the PI module, it is suggested that inventory costs be put in order and utility programs such as UT-K-E (to eliminate the Blank Location and any stray Locations that may have been created), SM-J-C, UT-K-G and IN-L-K be used to get the data as clean as possible. When you Freeze Inventory you need to give the count a number and select a count type. There are 2 Count Types. Type 1 is for a partial inventory when not all items are counted. Only counted items will be updated and uncounted items will be ignored. Count Type 2 means ALL items within the selection range of items frozen are counted and any uncounted items are assumed to be gone and are zeroed out. The range of frozen items can be further filtered by the fields indicated. Freezing the inventory simply takes a snapshot of current on-hand quantity and costs and does not prevent further processing. 17

Once the inventory is frozen, the counts can be entered in PI-C. If you do not use pre-printed numbered tags, the tag number can start with 1 and increment by part. More than 1 tag can be entered for a given part number and the count will add together. Serialized or Lot controlled items require a unique tag entry per lot or serial number. You can also use a bar code scanner to collect the counts and save directly to the Tag file (Evo-ERP Hand Held module) or collect into a separate file and then use the import capability in PI-C to import the counts. Once counts are entered, PI-F gives the counted inventory value and, ultimately PI-G posts the change to the permanent inventory and (optionally) GL files. Bin Location changes can also be optionally posted to the permanent inventory master file. If GL posting is selected, a transaction will be posted for every part number so if you do not want all that detail in the GL, say N to the GL posting in PI-H and make a manual Journal Entry for the correction to the GL. Cycle Counting is another method of verifying inventory counts. Cycle codes can be manually assigned to items in IN-B or assigned based on usage value using IN-L-T. The cycle codes can then be used to print a count sheet using IN-J and enter adjustments in IN-C or IN-K, or to selectively freeze inventory using PI-A to use the PI module to enter the counts. Job Cost Reports If there is a need for more detailed Job Cost reports, perhaps to research something on the WIP summary that doesn t look right, there are a number of transaction reports that can be run. JC-C is labor transactions detail, JC-E is material issues, JC-F is material and processing purchases and JC-Q is finished production and variance. Inventory to GL Reconciliations Inventory Value The Inventory in the balance sheet is substantiated by the Inventory Value report run at IN-F. This report can be run selectively by Location or for all Locations and, when sorted by Item Class, subtotals by Item Class. It can be run as of a prior date but you need to understand how it calculates prior date balance. It starts with the current value and backs out all transactions dated later than the as-of date. If you receive inventory into QC then the Inventory in QC report (PO-J-B) should also be run and the total added to the IN-F total. Do not simply say Y to include items in QC on the IN-F report as that will include the quantity in QC but at the current average cost which may not match the actual value in QC which is based on the PO price. IN-N-D can be used to identify dates and transaction detail where the GL transaction activity and Inventory transaction activity based on GL Account and transaction type do not match. The most common reason for discrepancies is Non-Inventory parts being assigned to item classes that are posting to the Inventory asset account on the GL. Those transactions will affect the Balance Sheet but the items will never appear in the Inventory Value report because Non-Inventory items never have an on-hand quantity. WIP JC-M is the report to use to substantiate the balance in WIP. If you run as a prior date, you will notice that several of the fields on the right side of the screen are completed automatically. Do not change them. WIP balance as of a prior date includes all transactions through the as-of date for all work orders still open as well as work orders currently closed but that closed since the as-of date so they potentially had a balance at that time. PO/RNI PO-I-F is the report to substantiate the PO/RNI balance on the balance sheet. First, you need to make sure old PO s not really waiting for invoices are not on the report. They can be closed 18

using PO-K to remove them from the report, however this makes no accounting entry. Once the report accurately represents PO Receipts not yet invoiced, the balance should match the balance sheet. Similar to IN-F, if there is inventory in QC, the PO-J-B report needs to be run and the total added to the PO-I-F report. Advance Payments and Deposits Advance Payments or Deposits are available in both AP and AR. In AR, the deposit is entered in AR- N and optionally assigned to a Sales Order. It can also be entered in AR-C but in that case it will always be a deposit on account unless you edit it in AR-N and attach it to a Sales Order. Customer Deposits post to the default Customer Deposit account defined in AD-A which should be a liability account. When the invoice for the order is processed, the amount of the deposit assigned to the invoice will print, showing the invoice amount, deposit applied and net amount due. If a customer deposit is not attached to a Sales Order, it will need to be applied to the invoice in AR-C after the invoice is posted. In AP, the deposit is entered in AP-V and optionally assigned to a Purchase Order. The creation of a deposit will generate a voucher entry on the AP Aging to be picked and paid so you can generate the vendor payment for the deposit. The act of paying the voucher for a deposit will generate a new credit on the AP Aging for the open deposit. The open deposit will post to the default AP Deposit account defined in AD-A which should be an asset account. The open deposit can then be selected in AP-C (if attached to a PO) or AP-F. Payment Processing AP, AR & Cash (Bank Accounts) Checking Accounts (as defined in AD-B) do not necessarily have to be actual accounts with a bank. They can be used for any sort of account that may be used to make payments in AP or Payroll or receive payments in AR or anything else that you may want to maintain and reconcile a register for. Some examples of uses for checking accounts that are not really bank accounts: Credit Card Payment AP: If you set up a liability account for AP Credit cards as a Checking Account in AD-B then you can use it to process vendor payments, as COD in AP-C, Manual Checks in AP-B or epay in AP-F if the voucher is entered before you realize it will be paid by credit card. Paying the vendor in this manner allows the vendor payment to be posted to the proper accounting period and recognizes the liability to pay the credit card vendor in the future. You can then enter other items on the credit card statement at GL-L assigning them to a GL account and, optionally a vendor. When you get the credit card statement, enter it as a single line to debit the liability account. Since there are now 99 available bank accounts, if you have multiple credit cards you can give each a separate Bank for reconciliation purposes but have them all post to the same liability account. Once the voucher for the statement has been entered, GL-J can be used to reconcile the account to zero. Undeposited Funds AR: If you receive multiple payments from customers between trips to the bank, you can create an asset account for Undeposited Funds and enter customer payments to that account. Then, when you do go to make a bank deposit, use GL-K and make a transfer of the lump sum amount from Undeposited Funds to the actual bank account. Then, when you are reconciling, the check register for the actual bank account will show the lump sum amount as opposed to all the customer detail. You can then reconcile the Undeposited Funds to $0 whenever you make a deposit. 19

Customer Credit Card Payments: If you accept credit card payments from customers, you can treat them the same as the Undeposited Funds. Create an asset account for Credit Card Payment AR and make it a Checking Account. Post credit card receipts to that account, then when the funds actually hit your account, make a transfer and reconcile the Credit Card account to $0. Non-Calendar Fiscal Periods Fiscal periods within fiscal years are established at AM-N and reset each time year end routines are run. If your fiscal periods are calendar months then the program defaults to that, you simply save and you are done. If you have non-calendar months (4-4-5 periods) or are changing fiscal year and will have a short year, you need to make the appropriate entries in AM-N. Non-calendar month is self-explanatory, you need to enter your monthly start dates. For a short year, enter the appropriate start date for next year, the start date for each month and then repeat the last month of the short year as the start date for all the months after it. Posting Date Control Open Period Start and End dates can be entered either in AM-A or AD-A. There are three dates that can be entered to control whether or not posting can occur on a specified date. Open Period Start date is the first day that posting will be allowed in all programs such as PO Receipt, Work Order processing, Sales invoicing, etc. Open Period End Date is the last date such processing will be allowed and can be set to prevent posting into the future such as mistyping a year. Accounting Open Period Start Date allows, by default settings, for accounting to post entries in AP-B, GL-B and/or AR-C to dates prior to the Open Period Start date that controls everything else. This allows accounting to finish up journal entries and such for the prior month or even year, keeping it closed to everybody else. Accounting Defaults GL Posting Defaults: You may choose not to have some types of GL transactions generated by the manufacturing system post to the General Ledger. Regardless whether GL posting occurs, the manufacturing side of the system tracks all transactions and costs and reports can be used as supporting documents to make Journal entries. If GL Posting is set to Y for any of the transaction types, the GL accounts posted to will be the System Default accounts defined later in this program unless specific Item Class GL accounts are defined in SM-C Enter Item Classes for a given Item Class and Inventory Location. Post COGS transactions?: If this flag is set to Y, then when invoices are posted in SO-G Post Invoices a GL transaction will be posted debiting COGS and crediting Inventory for the cost of the items on the invoice. Invoice posting will make GL postings to Accounts Receivable, Sales, and Sales Tax Withheld, Commission Expense and Freight Out as applicable regardless of this flag setting. Post PO transactions?: If this flag is set to Y, then when Purchase Orders are received in PO-C Receive Purchase Orders, a GL transaction will be posted debiting Inventory or WIP and crediting Purchase Orders Received/Not Invoiced. When the vendor invoice is entered in AP-C Enter Purchase Order Invoices, a GL transaction will be posted crediting Accounts Payable and debiting Purchase Orders Received/Not Invoiced and PO Freight In and PO Sales Tax Expense, as applicable. Post Inventory Adjustments?: If this flag is set to Y, then adjustments to inventory made using either IN-C Enter Inventory Adjustments or IN-K Adjust Physical Levels will post a transaction between Inventory and COGS, either debiting or crediting depending whether the inventory is increased or decreased by the adjustment. Post WO transactions?: If this flag is set to Y, then all transactions in and out of WIP will create GL Transactions. Materials Issued to Work Orders will debit WIP and credit Inventory. Labor charged to Work Orders will debit WIP and credit the Absorbed Labor and Overhead accounts. Finished 20

Production will credit WIP and debit inventory and any variance posting will post between WIP and WIP Variance with the debit or credit determined by whether the variance is positive or negative. Permit use of Item Class GLs?: If this flag is set to N, then all GL posting will use the system default accounts for Inventory, COGS, Sales, WIP, and Absorbed Labor and Overhead for all postings. If this is set to Y, then the system default GL accounts can be overridden for a given Item Class and Location by making an entry in SM-C Enter Item Classes. Fiscal Year Date: If you are on a calendar year, this would be January 1 of the current year. If you are on a non-calendar fiscal year, then this is the starting date of your year. This is automatically updated when you run AM-B Fiscal Year End Routine. CAUTION: Once the Fiscal Year Date is set, it is never manually re-set. The only time you should ever make an entry in this field is during system startup. If you are changing fiscal year and will have a short year, define the short year in AM-N by repeating the last month start date to complete all 12 slots and then enter the new Next fiscal year start date. Default GL Account Codes None of the GL account code fields described below should be left blank. If you do not plan to use a particular account, you should enter the same account number you will use as your GL Clearing Account (see below). These are the default accounts to which your transactions will be posted. NOTE: All account codes you enter can also include a department code. We recommend confining the use of department codes to income and expense accounts. See AM-D, Enter General Ledger Departments, for a discussion of department codes. ACCOUNTING GL ACCOUNT CODES GL Current Earnings: Current Earnings is the account where the net income/loss for the current year is posted when printing a balance sheet in GL-F Print Financial Statements or in GL-N Print Custom Statements. This is always a calculated amount without any actual posted entries in the General Ledger transaction file. This is an owner's equity account. GL Retained Earnings: The income/loss for years prior to the current fiscal year are maintained in this account. When you run AM-B Fiscal Year End Routine at fiscal year end, each income and expense account for the fiscal year gets a year end entry that brings its balance down to zero, and a single corresponding entry is made to this account that represents the net income or loss for the year. Entries posted to prior years for income and expense accounts also automatically have a closing entry posted to this account. Transactions may be posted to this account as for example a payment of profit or dividends to owners. Adjustments to prior year earnings should be posted to the appropriate income or expense account and the Retained Earnings will automatically be updated. This is an owner's equity account. GL Clearing Account: This account is used if a GL account code is not found during a posting. You must enter a GL clearing account code. If you do not set up this account, any GL account not found during a posting will result in a transaction that will put your accounts out of balance. By using this clearing account, you can ensure that no transactions will be lost. We recommend an account number such as 000000 or 99999, so that it is always at the beginning or end of your chart of accounts. It is important that this account be made a type O account (Owner's Equity). AP Accounts Payable: The account code for your Accounts Payable GL account. This is a liability account. AP Discounts Taken: If your vendors offer discount terms on their payables, the system will post those discounts to this account. This can be either an expense or income account. AR Accounts Receivable: The account code for your Accounts Receivable GL account. This is an asset account. 21

AR Discounts Taken: If you offer discount terms on your receivables, the system will post those discounts to this account. This can be either an expense or income account. AR Interest Charged: If you charge your customers interest on overdue invoices, the system will post the interest to this account. This is an income account. Interest charges are made by running AR-D Charge Interest on Invoices AR Customer Deposits: The account code for any customer deposits (prepayments) that will eventually get applied to invoices. Deposits are kept in a separate account so as not to be mingled with Accounts Receivable. Customer deposits can be entered through AR-N Enter/Print Sales Order Deposits or through AR-C Record Payments. This is a liability account. SO Taxable Sales: The revenue account for taxable sales to customers. This is the system default account and can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes or at the Customer level by defining an account in AR-A Enter Customers. SO Non-taxable Sales: The revenue account for non-taxable sales to customers. This is the system default account and can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes or at the Customer level by defining an account in AR-A Enter Customers. SO Invoice Freight Out: The account you charge for freight that is invoiced to customers. This can be either an income or expense account. SO Sales Tax Withheld: The system default account for sales tax withheld when posting customer invoices. This a liability account and can be overridden by entering a specific account in SM-E Enter Tax Codes. SO Retention: This account is only needed if you are planning on using the sales order retention billing feature. A GL account is needed to temporarily hold retention amounts when the original invoice gets posted, but the newly created sales order for the retention does not get posted. When the retention sales order finally gets posted, the dollars get credited from the retention GL account and get debited to your default AR account. This should be an asset account. CS Agents Comm Payable: Whenever invoices or customer payments are posted that include sales commissions payable to agents, the program will credit the commission amount to the GL account entered here. A corresponding debit will be posted to the Agents Commission Expense account entered in the next field below. When agent commissions are transferred to Accounts Payable through CS-D Transfer Sales Commissions, this account gets debited and your default Accounts Payable account gets credited. This should be set up as a liability account. CS Agents Comm Expense: When invoices or customer payments are posted that include commissions payable to agents, this account gets debited for the commission amount. This should be set up as an expense account and can also be set up for each sales rep in CS-A Enter Sales Reps. MANUFACTURING GL DEFAULTS IN Inventory (Asset): The default account for all on-hand inventory. This should be an asset account and can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes IN Inventory Cost of Goods Sold: This is the expense account that will be posted to when invoices are posted in SO-G Post Invoices or inventory adjustments are made via IN-C Enter Inventory Adjustments or IN-K Adjust Physical Levels. It can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes IN Absorbed Freight In: If you will be using the Freight Pct field in IN-B Enter Inventory to absorb freight into your inventory cost, this is the account to which the credit side of the entry will be posted (the debit will be to the item's Asset account). If you plan on absorbing all your freight into the inventory, you can contrast the month end value of this account with your actual Freight In account to see how close to reality your Freight Pct settings are. This is an expense account. 22

PO's Received Not Invoiced: This is a holding account for purchase orders which have been received but have not yet been invoiced. When an item gets received in PO-C Receive Purchase Orders, its expense or asset account gets debited and the PO's Received Not Invoiced account gets credited. When the vendor invoice is recorded in AP-C Enter Purchase Order Invoices, PO's Received Not Invoiced gets debited and Accounts Payable gets credited. This is a liability account, normally located adjacent to your Accounts Payable account. PO Freight In: This is the account that registers the amount of freight vendors add to their invoices for shipping orders to you. This is an expense account. PO Tax Expense: If you are charged tax on purchase orders, the system will post these amounts to this account. This is an expense account. WO Extra Costs: If you plan on entering any costs through WO-H Enter Misc/Extra Costs, this field provides GL posting with a credit entry to offset the debit entry to the WIP account of the item being manufactured. This is an accrual expense account that will ultimately be washed out when an invoice gets received and the debit expense brings the credit amount back to zero. WO Miscellaneous Costs: If you plan on entering any miscellaneous costs through WO-H Enter Misc/Extra Costs, this field provides GL posting with a credit entry to offset the debit entry to the WIP account of the item being manufactured. This is an accrual expense account that will ultimately be washed out when an invoice gets received and the debit expense brings the credit amount back to zero. Miscellaneous costs are tied to specific routing sequences, whereas extra costs are to the work order as a whole. WO Absorbed Labor: The General Ledger account for absorbed labor, normally an expense account adjacent to your direct labor expense account. As transactions are entered through WO-F Enter Labor or posted in DC-H Post Labor Transactions or WO-N Post Labor Batches or Type L (Labor) parts are issued to Work Orders in WO-G Issue Materials or by backflushing in WO-I Enter Finished Production, labor costs are credited to this account and debited to the WIP account of the item being manufactured. This is the system default account and can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes WO Absorbed Fixed Overhead: The GL account for absorbed fixed overhead, normally an expense account adjacent to your fixed overhead expense accounts. As transactions are entered through WO-F Enter Labor, or posted in DC-H Post Labor Transactions or WO-N Post Labor Batches or Type L (Labor) parts are issued to Work Orders in WO-G Issue Materials or by backflushing in WO-I Enter Finished Production, fixed overhead costs are credited to this account and debited to the WIP account of the item being manufactured. This is the system default account and can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes. WO Absorbed Variable Overhead: The GL account for absorbed variable overhead, normally an expense account adjacent to your variable overhead expense accounts. As transactions are entered through WO-F Enter Labor, or posted in DC-H Post Labor Transactions or WO-N Post Labor Batches or Type L (Labor) parts are issued to Work Orders in WO-G Issue Materials or by backflushing in WO-I Enter Finished Production variable overhead costs are credited to this account and debited to the WIP account of the item being manufactured. This is the system default account and can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes WO WIP Inventory: The GL Asset Account for Work In Process inventory. This is the system default account and can be overridden at the Item Class level by defining an account in SM-C Enter Item Classes. WO WIP Variance: If any cost changes are made in AP-C Enter Purchase Order Invoices to a work order that has already been closed, the cost differences are posted to this account. A posting to this account will also occur to zero out the net cost in WIP when a Work Order is closed in WO-I Enter Finished Production or WO-J Close/Cancel Work Orders and has residual costs (actual costs in do not equal finished production out). This is normally an expense account that is adjacent to your Cost-of- Goods-Sold account. 23

Month End Procedures In addition to the reconciliation of Inventory, PO/RNI and WIP to the balance sheet as described above, it is good accounting practice to also reconcile Accounts Payable, Accounts Receivable and Cash. Accounts Payable and Receivable Aging can both be run as of a prior date to match the balance sheet. If they do not agree, you can work backward to find a point at which they do, then compare Aging to the trial balance day by day until the specific problem is identified. Both AP and AR can have Deposits which do not post to the AR and AP GL accounts so you must run the Aging excluding Deposits to reconcile to the GL. You can also run it for Only deposits to reconcile to the Deposit accounts. After reconciling to the bank statement using GL-J, printing a check register of uncleared items, both checks and deposits through the month end date will generate a report that starts with the number you and the bank have agreed on (bank statement ending balance that has been reconciled) and lists the items that you have processed but the bank doesn t yet have on the statement. The ending balance should match the balance sheet. Year End Procedures AM-B Year End Routine should be run on the first day of the new fiscal year. It accomplishes 3 things: Reset the Fiscal Year Start Date to the new year, Close out income and expense accounts to Retained Earnings, and roll forward balances for balance sheet accounts for the new year. It does NOT mean you can not continue to post entries to the prior year. The post date control is established in AM-A. It is recommended that you set the Open Period Start Date to the new year as soon as all invoicing and physical inventory adjustments and such that need to be dated in the prior year have been entered but you can leave the Accounting Open Period Start Date open in the prior year for as long as it takes to finalize the year as far as adjusting Journal entries and such are concerned. You can also change the regular Open Period Start Date back to last year if you find something that needs to be adjusted other than with a journal entry. Change it back, make the entry, post in GL-O and then reset to the current period. DO NOT reset the fiscal year or run AM- B more than once. The program is smart enough to know to close out any prior year income or expense account transactions to Retained Earnings. Accounting Utilities If you do run AM-B more than once or for any other reason the trial balance account balances do not match the income statement or balance sheet, we do have utilities that can be used to get things back into synchronization. The GL stores information in a number of different files. There is the GL Transaction detail file which is used for GL-C, D & E, the Chart of Accounts summary file used in GL-A, F and N and the Check Register used in GL-I & J. UT-K-D, Recalculate Chart of Accounts can be used if the transaction detail does not agree with the monthly summary in the chart of accounts as seen in GL-A and financial statements. UT-A, GLEREDO will zero out and recalculate Retained Earnings and generate closing Year End entries for the one through 6 years past that need to be posted in GL-O. UT-A, EDITGL will allow creation of a one sided entry if the transaction detail is in fact out of balance. After making such an entry, you need to run UT-K-D to recalculate the affected account. Finally, if the check register and financials do not agree, use GL-J and clear all items that should be cleared and are on the bank statement and save the reconciliation. If the balance does not match the bank, you will get a warning but save it anyway. Then go to AD-B and edit the bank and change the balance on that screen to match the bank statement and run GL-I, uncleared only all types and you should get a listing of uncleared items. If you confirm that those are in fact the entries that have been processed but not yet cleared by the bank then the ending 24

balance of the report is your true cash balance. If it does not match the balance sheet, you will have to use GL-B and make a type 1 Journal entry to correct it. Going forward, once you are balanced you should never make Type 1 Journal entries to cash accounts. Any entries that are not processed through AR, AP or Payroll can be entered in GL-B but as Type 2 or 3, Cash Receipt and Cash Disbursement. Transfers between accounts should be done using GL-K. 25

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