Every once in a while, a company will want to change their costing method from whatever they have into something else for whatever reasons.
The official way of changing the costing method for any items in Dynamics 365 Business Central (Dynamics NAV) is to basically zero out the item and create a new set of item numbers with the new costing method.
However, doing this may not be feasible because you end up losing all item history, in addition, depending on how much history you have, renaming item numbers will take a long, long time.
The Unofficial Way
There’s an unofficial way that Microsoft does not promote for companies to change the costing method. This is understandable because if the user does not follow the instructions, there’s no way Microsoft can support all of the different scenarios that comes up.
Before the company can make such a change to the costing method, the following tasks has to be done:
- All Receipts needs to be invoiced
- All Shipments needs to be invoice
- All Production consumptions needs to be output
- All Transfer Shipments must be received
- All Service shipped/consumed must be invoiced
- Remove all reservation entries in the system
- All Drop Shipment orders needs to be removed
- Run Adjust Cost – Item Entries process
The biggest problem that companies run into is documents that are “stuck in the middle”, basically, shipped/received not invoiced. By not having a clean break, if you were to proceed with the costing method change, you will never be able to tie out your inventory valuation to the General Ledger.
Here’s what you will need to do in Dynamics 365 (Dynamics NAV) in order to convert to a different costing method:
- Run Adjust Cost – Item Entries
- Negative adjust all items to 0 as of a specific date (for example, 03/31/2018)
- Run Adjust Cost – Item Entries
- Force change the costing method using code without running validation (use Configuration Package or get a developer should do this)
- Positive adjust all items back in on the day after step #2 (for example, 04/01/2018)
- Run Adjust Cost – Item entries
Then done, you’re done.
After the costing method change is done, back dating of inventory transactions cannot be allowed.
This includes any item charges that may apply to receipts posting in the previous periods!
For example, if we change the items from FIFO to standard on 03/31/2018, no additional postings for these items on or prior to 03/31/2018 should be made. This will need to controlled through the Allow Posting From on the General Ledger Setup and the User Setup.
In addition, revaluation of inventory should not be done prior to 03/31/2018 as well for the items. Doing so may cause irreparable damage on the inventory value and will cause your inventory ledger to not match your G/L.
The method described above is not recommended by Microsoft. I think this is because there are many ways things can go wrong if not done properly.
Having said that, we’ve done this for many of our customers without problems. Strict controls on when the posting is allowed must be followed. If done properly, changing costing method is really not that big of a deal.
10 thoughts on “Changing Costing Method in Dynamics 365 Business Central (Dynamics NAV) – The Unofficial Way”
this method seems to be good.
what about inventory period ? if the customer used inventory period it could be good to close it, no ?
Yes, that’s a good idea, although the adjust cost process doesn’t really take the inventory period into account when it does it’s thing.
Great text. You can’t change it through Rapid Start as it still goes through the validations in the code and error if you have ILE’s.
You can RapidStart the data back in. Just don’t check on the Validate checkbox on the costing method field.
This is really interesting. Is there any link to the “official” way? Just to compare the efforts.
The official way is buried in an old Navision support ticket that hidden within the Microsoft site…
If we negative adjustment on 03/31, then positive on 04/01, then there will be a loss on March, and profit on April, right?
If nothing else is done, that’s correct. What some companies do is they accrue the adjustment account in an inventory suspense account in the balance sheet, then reverse it out on the 1st the following month.
Here is a link to the official method, from Microsoft: