Cost Engine Chat Colin and Victor 24/09/2010
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Hi Colin [22/09/10 22:58:38] Victor Perez Juarez: how are you? [23/09/10 00:39:20] Colin Rooney: hi Victor, I'm ok thanks and you? are you keeping well? Not too stressed out I hope? :) [23/09/10 00:40:16] Victor Perez Juarez: hey I am fine thank [23/09/10 00:41:07] Colin Rooney: good to hear [23/09/10 00:42:04] Victor Perez Juarez: I ask your opinion about the cost engine that I am development [23/09/10 00:42:50] Victor Perez Juarez: have you some minutes ? [23/09/10 00:42:58] Colin Rooney: ok [23/09/10 00:43:04] Colin Rooney: I just went to get a coffee [23/09/10 00:43:12] Colin Rooney: costing ... sure tell me [23/09/10 00:43:16] Victor Perez Juarez: ok please red this convesation [23/09/10 00:43:20] Victor Perez Juarez: http://adempiere.com/index.php/Cost_Engine_Chat_Bayu_and_Victor_23/09/2010 [23/09/10 00:43:48] Colin Rooney: reading [23/09/10 00:57:20] Colin Rooney: thinking... from a purely accounting perspective I would speak with Mike he seems to know this complex multi-org stuff "inside out" [23/09/10 00:57:49] Colin Rooney: it's a big question... I think I need to think about it [23/09/10 00:59:18] Victor Perez Juarez: yes I ask he , in our last conversation we think that the best in the approach based on enable create a new record in the product category acct tab for each organization [23/09/10 01:00:40] Victor Perez Juarez: but after the conversation with Bayou I think the best approach is use cost type into the warehouse window [23/09/10 00:58:08] Colin Rooney: put at first read it all seems very logical [23/09/10 00:58:18] Colin Rooney: I just want to consider to see if I can think of any possible issues [23/09/10 01:03:01] Victor Perez Juarez: as I said the unique adventage is that the accounting engine use the product asset accout for register any transaction and should use warehouse account , but this is not use [23/09/10 01:04:18] Colin Rooney: hmmm... [23/09/10 01:04:21] Victor Perez Juarez: but if we using the warehouse then we can have an inventory account for costing method [23/09/10 01:05:30] Victor Perez Juarez: so this is valid because I can reconciliate my balance sheet by costing method [23/09/10 01:05:34] Colin Rooney: in your example you speak of two orgs .. a manufacturing & commercial (retail?). and how they use different costings [23/09/10 01:05:40] Colin Rooney: so why not just put it at the org level? [23/09/10 01:05:59] Colin Rooney: (a warehouse is an org too I think?) [23/09/10 01:06:24] Victor Perez Juarez: yes you can have single organization with 2 warehouse but each warehouse use costing method [23/09/10 01:07:39] Colin Rooney: I guess onc eyou open this bag there are all kinds of valid combinations ... they might setcosting by product category or even product (mor probably as exceptions to the product category) [23/09/10 01:07:41] Victor Perez Juarez: in my example the manufacturing & comercial (retail) are legal entity , but I want consolidate the data in Statements [23/09/10 01:08:13] Victor Perez Juarez: the reason I need share the BP data and Product Data [23/09/10 01:08:39] Victor Perez Juarez: but the best practice I need that the manufacturing company use standard costing method [23/09/10 01:09:22] Victor Perez Juarez: and the comercail use average invoice consting method , so I need a costing method by organization [23/09/10 01:10:22] Victor Perez Juarez: the issue the product category is that you now only can overite costing method for all organization [23/09/10 01:10:41] Colin Rooney: if two warehouses are managing the costs differently might it be possible to create false value by transfering from one place to another? [23/09/10 01:10:45] Victor Perez Juarez: and I need the same product in two organization [23/09/10 01:11:11] Colin Rooney: yes, with you with that ... should at least be doable per org [23/09/10 01:11:42] Victor Perez Juarez: the example is Pchair I sell in comercial company and manufacturing in Forniture org [23/09/10 01:12:04] Colin Rooney: yes, I agree this per org should be doable. [23/09/10 01:12:51] Colin Rooney: but if the cost is lower in 1 than the other and I want to up my margins because as mfg manager I get paid bonus on margins [23/09/10 01:13:05] Victor Perez Juarez: now you would if create other account schema , but this aproach generate a lot the innecessary information [23/09/10 01:13:09] Colin Rooney: well then if I ship from the other warehouse I can get better margins! [23/09/10 01:13:10] Colin Rooney: :) [23/09/10 01:13:32] Colin Rooney: yes, multiple schema is not a good solution - I agree [23/09/10 01:13:51] Victor Perez Juarez: a valid question is : [23/09/10 01:13:52] Colin Rooney: just looking for possible flaws in the proposal that's all [23/09/10 01:14:34] Victor Perez Juarez: Is legal in EU have multiples inventoy for each warehouse? [23/09/10 01:14:55] Victor Perez Juarez: Is legal in EU have multiples inventoy valuation (costing method) for each warehouse? [23/09/10 01:15:16] Colin Rooney: well unfortunately in the EU each country makes its own laws [23/09/10 01:15:27] Colin Rooney: there are just some general directives from the EU [23/09/10 01:15:37] Colin Rooney: how they get implemented is up to each country [23/09/10 01:15:58] Victor Perez Juarez: because my blance sheet can saw Invenotry Average Cost and Inventory Standard Cost [23/09/10 01:15:57] Colin Rooney: I would need to check to know if you can cost a product differently [23/09/10 01:16:08] Colin Rooney: but I don't see why not [23/09/10 01:16:42] Colin Rooney: the important thing is that the cost is a fair interpretation of the facts [23/09/10 01:18:16] Victor Perez Juarez: the issue that current aproach is that break the accounting principles, becuase if you overwrite the costing method based on product category , you valuation report is not matched with the balance invenotry account [23/09/10 01:20:16] Colin Rooney: well the valuation report is also somewhat flawed now I think - in that you can run the report for any time but it uses current costs [23/09/10 01:20:26] Victor Perez Juarez: so will be great if Mike know if have costing method for each warehouse is valid for GAAP internacional [23/09/10 01:20:43] Colin Rooney: I think you can use many different costs for different purposes [23/09/10 01:20:50] Colin Rooney: and so you must consider what the purpose is [23/09/10 01:21:01] Colin Rooney: when we think about costs in our accounting schema [23/09/10 01:21:08] Colin Rooney: it is to determine profit [23/09/10 01:21:20] Victor Perez Juarez: yes this reason that I create other [23/09/10 01:21:25] Colin Rooney: but sometimes it might be for control purposes [23/09/10 01:22:05] Colin Rooney: so it might be our accounting approach is fine (though I agree should be per org) [23/09/10 01:22:21] Colin Rooney: but that doesn't mean we need other types of costs for control purposes [23/09/10 01:23:41] Victor Perez Juarez: you can see in http://adempiere.com/index.php/Sponsored_Development:_Libero_Cost_Engine#Valuation_Effective_date_Report [23/09/10 01:24:18] Colin Rooney: reading [23/09/10 01:24:49] Victor Perez Juarez: http://adempiere.com/index.php/Sponsored_Development:_Libero_Cost_Engine#Transaction_Value [23/09/10 01:25:16] Colin Rooney: aha so you have covered that! :) [23/09/10 01:25:38] Colin Rooney: so really we speak of costing for the determination of profit [23/09/10 01:27:09] Victor Perez Juarez: I want the cost that can use use for analisys or accounting , this reason that now with new cost engine you can activate multiples cost type and we setting the costing method [23/09/10 01:27:54] Victor Perez Juarez: so ths way you can use the same cost element in this case Material with diferrent Cost Type (FIFO, Average, etc) [23/09/10 01:28:31] Victor Perez Juarez: this way the new cost engine now allow the parallel cost [23/09/10 01:28:55] Victor Perez Juarez: but now I need a way the indicate that cost type will be use for generate the account facts [23/09/10 01:30:26] Victor Perez Juarez: so the change can be easy you change the cost type setting for accourning and repost the account and you have other accounting [23/09/10 01:32:20] Colin Rooney: well I cannot see any issue with the costing being at the warehouse level (other than the possiblity to abuse that as I mentioned previous). I guess the only question is how to implement [23/09/10 01:32:42] Colin Rooney: whether it's an option in warehouse or org (which is a warehouse/cost centre) [23/09/10 01:33:12] Colin Rooney: well that can always happen I think [23/09/10 01:33:32] Colin Rooney: you can use different costings for different purposes ... and of course they then give you different answers [23/09/10 01:34:14] Colin Rooney: to ensure you reports are exactly what is in the accounts I think the best approach is make the reports FROM the accounts [23/09/10 01:34:22] Victor Perez Juarez: exacly [23/09/10 01:34:54] Victor Perez Juarez: the unique issue now is that the costting method for accounting are defind in account schema [23/09/10 01:35:54] Victor Perez Juarez: and it limited that you can setting that an organization can generate the accouitng fact based on the specific costing emthod [23/09/10 01:36:09] Colin Rooney: why do you speak of costing at the product category? [23/09/10 01:36:24] Colin Rooney: I see only MAterial policy there [23/09/10 01:36:39] Colin Rooney: which is not costing just how the product is picked .. right? [23/09/10 01:37:18] Victor Perez Juarez: please go the accoount tab [23/09/10 01:37:26] Victor Perez Juarez: please you can see here that I said [23/09/10 01:37:39] Colin Rooney: agreed [23/09/10 01:37:41] Victor Perez Juarez: here you have the costing method and costing level [23/09/10 01:38:01] Victor Perez Juarez: but I think that break a good practice [23/09/10 01:38:23] Victor Perez Juarez: because the valuation inventory is demage in the accounting [23/09/10 01:38:50] Victor Perez Juarez: for a specific product category [23/09/10 01:38:49] Colin Rooney: oh yeah... hmm.. I never noticed that before! or I had forgotten [23/09/10 01:39:51] Colin Rooney: which takes preference? this over rides the schema settings? [23/09/10 01:40:41] Victor Perez Juarez: yes [23/09/10 01:40:51] Victor Perez Juarez: in the current business logic is that [23/09/10 01:41:16] Victor Perez Juarez: this overrite the account schema [23/09/10 01:41:16] Colin Rooney: but I agree the costing should be per org (right down to a warehouse) [23/09/10 01:42:44] Victor Perez Juarez: can you talk with Mike and review that this approach is ok? [23/09/10 01:43:15] Colin Rooney: yes I will chat with Mike about it [23/09/10 01:43:22] Colin Rooney: and email you [23/09/10 01:43:36] Colin Rooney: it must be very late there??? [23/09/10 01:43:44] Victor Perez Juarez: yes of course [23/09/10 01:43:49] Victor Perez Juarez: thank a lot Colin [23/09/10 01:43:59] Victor Perez Juarez: is nice chat with you [23/09/10 01:43:59] Colin Rooney: your are very welcome [23/09/10 01:44:07] Colin Rooney: always ;) [23/09/10 01:44:20] Victor Perez Juarez: see you later [23/09/10 01:44:33] Colin Rooney: sleep well