When you receive new inventory from your suppliers, there are often cases when some items would be damaged during shipping and as a result, you need to notify the supplier about the damage and receive either replacement products or a credit for future purchases. Versa Cloud ERP helps your track this type of return.
We would need some GL accounts to track the credits we are expecting to be received before they are issued. First create a new account called AP credit to be issued(the name is just an example, use whatever name you want). If you want to get more granular, you can create one such account per supplier.
When you receive new inventory against PO, if any quantity is damaged, on the receiving page, only enter the quantity that is not damaged. Whatever quantity that is damaged is entered into the rejected box. Choose a reason for rejection and then proceed to post the receipt.
There are 3 possible scenarios after this.
One is that you still need to pay the supplier in full before the credit is issued by the supplier.
Second case is that you will contact the supplier and inform them about the damaged goods. The supplier agrees with you and issues a new invoice to only include the quantity that is not damaged.
Last case is that you contact the supplier and are informed they will ship new items to cover for the damaged items.
Here are the steps to handle each case.
Case 1: Enter bill for full amount.
Create a new bill against the supplier and then use the link to the shipment receipt to bring in the quantities that are received. Create a new line and enter the remaining amount for quantities that are damaged. When you enter this line, choose the account "AP credit to be issued". When you post the bill, the system will debit the AP Credit to be Issued Account to reflect the fact you are expecting a credit coming from the supplier. After this, the bill amount should match the initial PO total. Pay the bill following the current process.
When the actual credit is issued, you will create a new bill against the same supplier and then enter the credit (as a negative amount) in a new bill item line. Choose the AP Credit to be Issued Account as the account to post to for the line. Make sure the credit amount is entered as a negative amount. When you post the bill, the system will credit AP Credit to be Issued and debit AP.
This negative bill now represents the credit you have with the supplier. You can use this negative bill to offset future bills from this supplier. Just choose to "pay" this negative bill when you are ready to use it to offset another bill. The system will use the negative bill to reduce the amount you are paying. If the supplier decides to issue you a cash refund for the credit, you can also "pay" the negative bill and receive a deposit into the account you used to "pay" the negative bill.
Case 2: Enter bill without the damaged items.
Follow the same process to create a new bill and link new bill lines to the shipment receipts. The total for the bill would not include the damaged products. Pay the bill following the current process. Change the PO to reduce the quantities on order so that the system will treat the PO as fully received.
Case 3: Wait for new replacement and then enter bill.
Receive the purchase order and only receive quantities that are not damaged. Wait for the new shipment to come and then receive the good quantity into the system. Then enter the bill for the full amount on the PO.