Hi Everyone, as promised last week, I am back with my new blog on Microsoft Dynamics 365 finance and operations. Today we will be discussing about the new feature “Revenue recognition” launched by Microsoft. So, let’s start with it.
Microsoft in recent platform release (Update 30) has introduced new feature called revenue recognition which helps organization to recognize revenue in different types of scenarios from each sales order and also it has introduced as feature called as “Bundle”. There are many things which can be performed using this new feature but we will pick one interesting or most common required functionality which any of the organization using Dynamics 365 can utilize and in next blog we will discuss about other functionality from “revenue recognition”.
Pre-requisites: To enable this feature we need to enable the licence configuration for this by navigating to System Administrator > Setup > Licence Configuration > Expand General Ledger node > Select revenue recognition module
Note: To enable this your system should be in Maintenance mode which you can do by login to LCS
Bundle: This functionality can be used by organizations where they receive customer order or they sale combo to customer and charge for that “one” line but internally they consume multiple lines or component which should deplete inventory for the component if component line is “Stocked” line.
Scenario: Let’s Say customer order an item “B001 with one quantity” which consist of two different items “C001 of 10 quantities” and “C002 of 5 Quantities”. Both components C001 and C002 are inventory items.
So, requirement is when we bill to customer then Customer Invoice should have only one Item “B001” but internally after posting invoice we should have COGS or inventory consumption based on “C001” and “C002”
Step-1: Create two items C001 and C002 with basic item setup and map “item model group” as stocked and specify UOMs, Item group etc….
Note: I am assuming that audience knows how to create “product master in Dynamics 365”
Note: After creating items increase the inventory using PO or inventory journal.
Step-2: Create sales item of type Bundle in our case it is B001. First setup this item as normal product creation as we did for “C001” and “C002”. After that perform two more steps:
- Enable item “B001” as bundle by navigating to Product information management > Released product > Select > Boo1 > Edit> General tab > Check “Yes” to bundle
- Create and Activate BOM (Bill of material for “B001”. Navigate to released product > Engineer tab in Action Pane > BOM Versions
Create BOM line and Activate BOM version:
Note: You should be able to see this in “Active BOM versions in Engineer tab in Action Pane
Now we are ready with setup, let’s create a customer order and Invoice.
Step-3: Create Sales order for item B001 with “1” quantity. Sales and Marketing > Sales Order > All Sales order
Click on new and Specify “Customer, Site, Warehouse etc…”
Step-4: Add line for item B001
Step-4: Confirm Sales order, once you will confirm the same order it will automatically gets exploded with its component lines “C001” and C002” with required quantity
Step-5: Invoice Sales Order and View Invoice, it will show only one-line item in customer Invoice “Boo1”
Step-6: View Inventory transactions for the posted invoice, Invoice Tab in Action Pane > Open Invoice > Navigate to Line , it shows component line only
Hope you liked this feature. Please like and share with your friends and Colleagues and provide your feedback in Comments or feel free to ask any question.
I will be back soon with the Revenue Recognition: Part-2!!!
Thank You Nikesh Kurhade for helping in writing this blog !!!
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Hi Saurabh, great blog and great explanation but there’s something I’m missing here. I see these accounts get used even when the revenue recognition feature is not enable. Is that in line with your expectations?
Yes that’s right because here we are trying to account the “component” COGS while selling on the bundle. So, financial impacts is same as how we have in any sales entry
this feature is obsolete! do you know if MS will replace it by another feature ?
Subscription billing is the new one