Reasons not to change the costing method of items in Microsoft Dynamics NAV

Applies to: Dynamics NAV 2018Dynamics NAV 2017Dynamics NAV 2016

INTRODUCTION


This article discusses why we recommend that you do not change the costing method of items in Microsoft Dynamics NAV.

More Information


We recommend that you do not change the costing method of items because such changes carry risks and may have severe consequences. These changes can cause data integrity problems or other potential problems.

Although you may have options to change the costing method, you can also work around making such a change. This workaround is to rename the item, create a new item number, and then enter adjustments to deliver the new inventory to the new item.

The core development team recommends that you do not change the costing method of items that have previous postings because it is very difficult to predict the outcome of the change.

Our experience shows that when customers try to change costing method, they encounter problems that affect data integrity. These problems occur because postings that are created under the new costing method sometimes create entries that apply to the old entries. This is true even though the customers and the partners in these cases believed that full approval was given to switch the database to a new costing method. These customers and partners faced a labor-intensive process of correcting item application entries that were made to historical entries. We have not analyzed these databases or the processes that were used to change costing method. Therefore, we do not know the cause of this behavior.

If you change the costing method, you can expect to encounter difficulties that will demand a labor-intensive and time-consuming correction. This is true even if you make the following preparations:

 

  • You invoice all purchase orders, sales orders, and production orders.
  • You empty the work-in-progress (WIP) account.
  • You make sure that no entries are open for application.
  • You post all the amounts to the General Ledger.
  • You clear the inventory by using negative adjustments to remove the costing method code.
  • You change the costing method.
  • You exactly reenter the inventory after you change the costing method.


Therefore, we recommend that you do not change the costing method.

If you must modify business practices, we recommend that you use a convenient numbering scheme to rename the item card to a name that contains a similar item number. For example, rename item number 1000 to X1000.

You can make adjustments to deliver the inventory to the new item number by taking the following actions:

  • Post adjusting entries to the renamed item number.
  • Post adjusting entries to the new item number to reestablish inventory together with the new costing method.


If you post adjusting entries to the renamed item number, you can adjust the quantity to zero. If you post adjusting entries to the new item number, you can reestablish inventory together with the new costing method. You may also want to consider quantity per location, per bin, or per item tracking number for both the old item and the new item. Both items could be open for posting for a specific period. This is especially true if the sales staff or the purchasing staff is aware that they do not have to post to the old item numbers. This is also true if invoicing has to be posted on received transactions or on shipped-only transactions for the old item number that was renamed.

After a short transition period, you can block all the old item numbers by clicking to select the Blocked check box on the item card. If some adjustment to these old items is required, you can remove the blocked code to let the adjustment be posted. Then, you can click to select the Blocked check box again to prevent additional postings.

To prevent additional adjustment postings, you can make the old items as fully invoiced or as fully updated as possible. You would do this before you change the item number of the item by using the new costing method.