Purchasing provides the line type feature so that you can clearly differentiate orders for goods from those for amount-based services or outside processing.
Requestors and buyers generally order both goods and services by quantity. You order the number of items you need in a specific unit of measure and at a given price. For instance, a buyer could order 10 computer terminals at a price of $1500 each. Later, the receiving agent records the receipt of one crate of 5 terminals. The accounts payable department receives a bill for 5 terminals, and matches the invoice against the original purchase order. Sometimes, you also need to order services in the same way. For example, you purchase 40 hours of product training at a rate of $40 per hour. You simply record the hours of training ordered and the price per hour. Once you receive the training, you record the hours received.
However, you sometimes order services by amount rather than by quantity. For example, a project manager orders $10,000 of consulting services to install a local area network. In this case, the buyer only needs to record the total amount of the service.
When half of the work is complete, the project manager records a receipt of $5000. The consulting firm may send an invoice for the complete amount of the service, or it may send partial invoices. In either case, the accounts payable department must match the invoice to the original purchase order by amount.
Purchasing provides you with the features you need to order both goods and services. You should be able to:
- Create your own purchasing document line types. For each line type, you should be able to specify the value basis: amount or quantity. For both amount and quantity based line types, you can specify default values for category, unit of measure, and whether you require receipt. For quantity based line types, you can specify the unit price, but for amount based line types the unit price defaults to 1. For quantity based lines, you can specify whether the line type is used for outside processing.
- Create a purchasing document with any combination of line types you need.
- AutoCreate purchase order lines from your requisition lines, grouping requisition lines for the same line type and item onto the same purchase order lines.
- Create amount-based purchase order lines by selecting an amount-based line type, category, item description, and total amount for the line.
The line type governs the type of requisition, purchase order, RFQ, and quotation lines you create. Quantity-based line types let you order and receive and/or invoice based on the quantity of goods or services provided. Amount-based line types let you order and receive and/or invoice based on the value of the service provided.
Use quantity-based line types when you want to specify the quantity, unit of measure, and unit price for the items you are ordering. Purchasing provides Goods as an initial quantity-based line type. You can modify this line type or create new quantity-based line types to satisfy your needs.
Use amount-based line types when you want to order services and other items by amount. You create an order for a service by selecting an amount-based line type, category, item description, and total amount of the service. You can also receive and match services by amount.
You can use outside processing line types to enter purchasing documents to pay suppliers for outside processing operations. Purchasing provides Outside Processing as an initial outside processing line type, and you can create additional outside processing line types. You cannot use outside processing line types, unless Purchasing, Work in Process, and Bills of Material are installed. See: Overview of Outside Processing.
Line Types Step by Step
Purchasing provides one initial line type: Goods. If Work in Process is installed, Purchasing also provides the line type Outside Processing. You can modify these line types or create new line types in the Line Types window. To define a new line type, you simply provide a name and description for lines types with a value basis of quantity or amount. You can then optionally specify a default category, whether receipt is required, and unit of measure. The unit price defaults to 1 for amount-based line types but is otherwise optional. You cannot specify a line as outside processing unless the value basis is quantity. You must provide a default unit of measure for amount-based line types. You use the unit of measure for amount-based lines as reference information only. Purchasing does not perform any unit conversion for amount based lines. You can create a unit of measure such as AMOUNT for amount based line types to help you determine if you ordered by amount. See: Defining Line Types. See: Defining Units of Measure.
Purchasing lets you specify whether you are creating a document line for quantity, amount, or outside processing. You simply choose the line type when you create your document line. You enter the item, item description, quantity, unit of measure, and unit price for quantity based document lines. For amount based document lines, you enter only the category, item description, and the amount (in the Quantity field). The Unit Price defaults to 1 and you cannot change it.
Since you typically use one line type more than the others, Purchasing lets you define a system default line type in the Purchasing Options window. All new purchasing document lines default to this line type. You can override this value when you need to create document lines of another type. You do not have to set up a system default if you use many different line types. See: Defining Default Options.
You can use AutoCreate Purchase Orders to convert approved requisition lines for items and services into purchase orders and releases. You can gather requisition lines for the same line type and place them onto a single purchase order. You can also place requisitions for different line types onto the same purchase order. Purchasing combines requisition lines for the same item, line type, unit of measure, and item revision onto a single purchase order line. See: Autocreate Documents Overview
Purchasing prints your document lines according to their line types. For quantity based line types, Purchasing prints the quantity, unit price and total amount for purchase orders and RFQs. Purchasing prints only the amount for amount based document lines.
The line type feature includes enhanced reporting to differentiate between quantity and amount based orders. Purchasing prints the line type so you can easily determine whether the information is quantity or amount based. For amount based orders, Purchasing prints only the total amount of the order.
Purchasing Services Step by Step
Purchasing lets you create requisition lines for services and other amount based orders. When you choose an amount based line type, Purchasing automatically sets the unit price to 1 for your line and enters the default unit of measure for the line type. You cannot change the unit price or unit of measure for amount-based requisition lines. You enter the amount of the service in the Quantity field. Your total line amount is the same as the value displayed in the quantity field. You can use the quantity field in your distributions to allocate the order amount to multiple accounting flexfields.
You can use AutoCreate Purchase Orders to create purchase order lines and releases from approved requisitions. You can gather all requisition lines for services and review these lines before placing specific ones on purchase orders. You can also split a requisition line for a service into several requisition lines for goods and services. Purchasing creates a purchase order for all of the requisition lines you choose.
You can also enter purchase orders for services manually by entering a service line type, the amount (Quantity) of the service, the category, and the item description. Purchasing automatically enters the unit price and unit of measure.
When you request a quotation from a supplier for a particular service, you can provide a complete description of the service you are requesting. You must choose a quotation type of Catalog if you want to use it for sourcing.
If you provide a requested service amount on your RFQ, Purchasing prints "Amount Requested:" followed by the total amount you entered. For example, you request quotations for the installation of a local area network and you know that you would like to pay $10000. You simply create an amount-based RFQ line and one shipment for this line. Purchasing automatically sets the unit price to 1 and fills in your unit of measure. On the RFQ shipment, you enter the amount, 10000, in the quantity field. Purchasing automatically sets the shipment break price and unit of measure.
When you choose sourcing information for amount-based requisition and purchase order lines, Purchasing copies the total amount from your chosen quotation shipment into the Quantity field of your purchasing document. Since you are creating an amount-based line and the unit price is set to 1, the Quantity field displays the total amount for the line.
You receive services the same way you receive goods. When you receive a service, your quantity fields reflect the amounts of your order. Simply specify the amount you receive, correct, or return in the Quantity fields. Purchasing displays your line type so you can determine whether you are receiving by amount or quantity. You must receive services and other amount-based purchases in the unit of measure specified on the purchase order.
When matching invoices to services purchase order lines in Payables, you enter the amount invoiced in the Quantity field. Payables defaults the unit price to 1 when matching to service orders. You should not change the unit price. Payables warns you if the unit price is not 1 for service orders.