#D365 #D365FO #D365FSC #PPV #PurchasePriceVariance #Setup #Reporting #VarianceAnalysisStatement #ItemModelGroup #PostingProfiles
Purchase Price Variance (PPV) is the difference between the Standard Cost of a product vs. the Purchase Order pricing.
D365 will automatically record the PPV when posting a
Purchase Order Receipt and also when posting the
Purchase Order Invoice.
In today's scenario we will demonstrate the following:
Item # #1
Standard Cost $1,000.00 ea
Purchase Order $1,005.00 ea (five dollars different than the Standard Cost)
Invoice $1,004.00 ea (four dollars different than the Standard Cost)
When we are finished we will see the detail and the net variance [$4.00] on the related reports (section 5. Reporting below).
1.1 Item Model Group
Make sure the Item Model Group that is assigned to our item is set up to accrue receipts in the General Ledger.
Inventory management > Setup > Inventory > Item model groups
1.2 Accounts Payable Parameters
Also, make sure the Accounts Payable Parameters are set to accrue receipts in the General Ledger.
Accounts payable > Setup > Accounts payable parameters > General (tab)
2. Standard Cost
Make sure the Item has an active Standard Cost.
Item # #1
Standard Cost $1,000.00 ea
Product information management > Products > Released products > [select your item] > Manage Costs > Setup > Item price > Active prices
3. Posting Profiles
As exhibited, assign a Main Account to the Purchase Price Variance posting profile.
Inventory management > Setup > Posting > Posting > Standard cost variance (tab) > Purchase price variance (radio button)
4.1 Purchase Order
Create your PO for an amount that is different than the Standard Cost.
Standard Cost $1,000.00 ea
Purchase Order $1,005.00 ea
Exhibit: Purchase Order
4.2 Purchase Order Receipt
Post the PO Receipt for the quantity ordered.
D365 has automatically calculated the PPV [$5.00] based on the Inventory Standard Cost of $1,000 vs the Purchase Order value of $1,005.
Exhibit: Purchase Order Receipt Voucher
4.3
Post the PO Invoice for the quantity received, but remember to change the Invoice amount to a value that is different than the Purchase Order.
Purchase Order $1,005.00 ea
Invoice $1,004.00 ea
Exhibit: PO Invoice Lines
Since the Vendor has invoiced a price that does not match the Purchase Order
($1,005 vs $1004), D365 will automatically record and additional PPV.
Exhibit: PO Invoice Voucher
Note: The combined PPV based on the Receipt and Invoice is now $4.00
($5.00 debit + $1.00 credit = $4.00)
5. Reporting
An out of the box report exists in D365 to report on variances. The report is comprehensive and covers many system variances (i.e. includes Production variances). Users may filter the report for a specific variance type (i.e. Purchase Price).
Cost management > Inquiries and reports > Inventory accounting - analysis reports > Variance analysis statement
Exhibit: Report parameters
Notice that both Purchase Price variances for today's scenario are listed.
The PPV variance related to Receipt is labeled "Physical"
The PPV variance related to the Invoice is labeled "Financial"
Cost management > Inquiries and reports > Inventory accounting - analysis reports > Variance analysis statement
Exhibit: Variance Analysis Statement (report)
Exhbit: Trial Balance (filtered for PPV Main Account
Note the the Variance Analysis Statement and Trial Balance report are synchronized.
We have successfully automated recording Purchase Price Variance on a Purchase Order Receipt [$5] and Purchase Order Invoice [$1] (net $4).
Our related Variance Analysis Statement and our Trial Balance report are in balance with synchronized values [$4] for today's PPV scenario.