Bundling and Sales Order Processing: Revenue Recognition in Microsoft Dynamics 365 Finance, Part 5

January 20 2020

In Part 4 of the Revenue recognition series, we reviewed Revenue price and Sales Order Processing.  In this article, we are going to review bundle functionality: what a bundle is, how to set one up, and how to use it as part of Sales order processing. We will run through a very simple example to illustrate the functionality within the system.

Bundle

Bundle items are the products that include two or more components. The setup for the bundle is the same as a bill of materials. BOMs have been used in the production module for a long time to group BOM components including versions, approval, and activation. Microsoft made the right decision to use this existing functionality for bundles rather than creating a new design all together.

In this article, we are using the bundle listed below to demonstrate the functionality:

  1. MG36201YR – is the parent item or Bundle item. It has following components:
    1. MG3620 – Canon Printer
    2. CAN1Yr – Cannon Printer 1 Year Service.

The components of the bundle can be regular item or service item. If the component is a Service item, in order to include the item as a component the model group for the service, the item must have the parameter “Stocked product” set to yes.

Here is how BOM item MG36201YR setup looks:

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

In order to flag the released product as a Bundle item, a new check box has been added on the released products form, and we need to set the check box to Yes.

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

Sales order creation and processing for Bundle item

The Sales order entry for the bundle item is the same as a regular Sales order entry. The order when entered looks no different than any other item.

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

If we try to confirm the sales order by adding a Bundle item and the BOM is either not setup or  not active and approved, then the sales order confirmation step will throw an error and the Sales order confirmation is not posted.

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

The first effect of an active and approved Bundle item is that it becomes visible during sales order confirmation. See the screenshot below for the sales order confirmation dialog form:

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

We placed the sales order for the bundle item. But on the sales order confirmation screen (above) notice how components are displayed instead of the bundle item.

The net amount on the bundle item was set to 140. During order confirmation the net amount is split into the BOM components based on individual component sales prices. See the calculation below that details how the net amount is calculated for the components:

 Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

The Sales order confirmation report when printed is shown below. It displays the bundle item as expected instead of component items:

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

After the Sales order confirmation, you will notice a few changes on the Sales order lines (The form below has been personalized to view the fields):

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

  1. The Bundle item line status is now ‘Canceled’. Prior to order confirmation the line status was ‘Open order’.
  2. The “Bundle net amount” field is populated and the unit price and net amount fields are blanked out.
  3. BOM components that make up the bundle item got added to the sales order along with the price calculation that we reviewed above.
  4. The Remove button is greyed out when a component item is selected. The components can’t be canceled using ‘Deliver remainder’ functionality either.
  5. Notice ‘Revenue schedule’ for CAN1YR is set to 12MActual. This schedule was defined on the released product form (Revenue recogntion tab).

Next, let’s look at “Revenue price allocation” on the Sales Order details page. To understand what ‘Revenue price’ is and how to set it up, refer my previous blog on Revenue price and Sales Order Processing.

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

Notice the sales order has both component items. The unit price is calculated based on the net amounts we reviewed earlier in this blog and the allocated price calculation logic is provided below.

Allocated price calculation

Next, let’s look at “Expected revenue recognition schedule”. Notice the form only has one item, because the revenue schedule was defined only on the CAN1YR (warranty) item.

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

Once the invoice is posted, the invoice also prints only the bundle item as expected.

Microsoft Dynamics 365 Finance Bundling and Sales Order Processing

Next Steps…

After invoicing the sales order, the actual revenue schedule is created. The steps to recognize the revenue remain the same and have been detailed in our previous article on Deferred Revenue processing

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About Satish Panwar

Satish works as a Senior Architect at Hitachi Solutions America and has more than 14 years of experience implementing different versions of Microsoft Dynamics AX. He holds numerous certifications and hold bachelor’s degree in Information technology.

More about Satish Panwar

Comments

Lewis-H's picture

Thanks for this information it is quite helpful. I would like to know more about MS Dynamics 365. I referred this link below and it has helped me a lot to learn about MS Dynamics 365.
https://www.o365cloudexperts.com/microsoft-dynamics-365/
I hope this helps you as well.
Regards,
Lewis


satish.panwar's picture

Hi Lewis,
Please take a look at official documentation from Microsoft at link https://docs.microsoft.com/en-us/dynamics365/ It details all the products under Microsoft Dynamics 365.