[ERPNext v4] Labour Information and Transactions

ERPNext
1

Workstations, BOM Operations and Time log are useful for recording labour transactions.

Are there any additional ways to record information and transaction about labour?

Assuming Indirect Labour is entered through JV.
Is there a way to get total spending on direct labour for a period?

2
  1. Create a account heads / group based on your accounting needs and add against those transactions.
  2. Create cost centers for projects / product groups.
3

BOM combined with Project works best for recording and reporting labour and other operations
Requirement: Information in BOM must be accurate and agreed upon by all production stakeholders.

##Example process of Building Repair contracting

###Predicting (material, labour & other workstations):

####Draft BOM Stage:

  • BOMs are made for each repair process Item (“Item” e.g Waterproofing, Paint coats, etc.)
  • BOM Records measurements of area under repair,
  • Machines (rented Cranes, Lifts) and Labour (mason, carpenter, etc.) are workstations / operations
  • Material in prescribed quantities are sent to operations
  • This stage helps in identifying cost & quantity.

####Quotation / Sales order Stage:

  • Bill of Quantities (Quotation) is made for each item sold in a project.
  • Selling price in quotation is charged on the basis of BOMs created previously.
  • if Quotation Items need changes, make changes in respective Item’s Draft BOM.
  • Finalized Quotation converted to Sales Order.

####BOM Submitted:

  • Once the Sales Order submitted, Project is created.
  • BOM is linked with project, verified and submitted.

###Tracking (material, labour & other workstations):

####Purchase & Production Stage:

  • Purchase of raw material takes place as per BOM.
  • Material transfer / manufacture takes place as per BOM.
  • Cost of Goods Sold expense account reflect all production costs.

####BOM:
each BOM for item shows material and labour, quantities & costs.

####Project:
BOM linked with Project helps for Project wise quantity & cost

###Unplanned Changes:

  • Extra material and labour consumed due to non predicted situations or wastage,
  • Customer adds tasks resulting in additional material and labour consumed,
  • Speeding up project with additions in Workstations, etc.

####Potential Solution for unplanned changes:

  • Using Rate Of Materials Based On in BOM as Valuation Rate, for price changes
  • Cancel, Amend or New for quantity changes
  • Cancel Old Documents and initiate altogether new process beginning with Quotation.
  • Amendments in Production Order & inter-linked Documents (BOM, Stock entry)

###Summary

  • BOM will help track costs, predict purchases and plan work order, etc.
  • Projects will track BOMs
  • Project completes within agreed bill of quantities (quotation).
  • Unplanned changes shows requirement for accurate planning for next project.
  • In case of changes exceeding Quotation prices, New Quote can be made to initiate new process.
  • If changes are within limits of Quoted price only BOM, Stock Entries and production is Amended

Any community suggestions, changes or point of views?

4

Would still recommend using Cost Centers if your business revolves around projects.

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5

Current Scenario - BOM Workstations and Operations:
I’ve created different Labour Workstations with different costs. Mason, Plumber etc.
All Costs on Labour are recorded in BOM Operations.
stock entry for Material transfer and stock entry for manufacturing takes place.

Confusing part in Stock entry:

  • During Material Transfer (stores > wip) “Difference Account” is,
    application of funds > current assets > stock assets > Stores
  • During Manufacture (wip > finished goods) “Difference Account” is
    Application of funds > current assets > stock assets > WIP

Is Operating costs / Labour charged here? Are these entries right for difference account?

Confusing part in Labour Payment:

  • Generally Money is transferred from Bank to Cash, Bank voucher to withdraw cash is created
  • Cash is paid for some material purchase, cash voucher payment of purchase invoices
  • Cash is paid to Supervisor/Labour. How to enter this in books of accounts? which is already seen in WIP > Finished Goods Stock entry

Currently, My books reflect Cash in hand for labour as well as Value in Finished goods inclusive of labour. Labour being provided twice. Any workaround, jv, help.

I’m Confused, any help?

Other Additional Information (optional):
There are some materials which are fixed costs e.g hammer, ladder, etc.
These will last for one whole project. Such Material in BOM Materials is required and purchase/inventory is managed for such material, Is there a way such that Semi-Variable/Fixed material also shows up in BOM Materials so stocks are checked, and it also adds up in fixed cycle cost/Total fixed cost
Currently there is no Fixed costs, everything is in Raw Material Cost.

6

Got one solution!

  • During Manufacture stock entry (wip > finished goods) “Difference Account” is Application of funds > current assets > cash in hand > cash a/c

Now Cash is reduced by operating costs which were charged in WIP before when difference account was WIP A/c.
Cash ledger shows WIP stock entry at credit side amounting to Labour / operating costs

Am i right on selecting difference accounts?

7

There are many upgrades to this in version 5.

In version 5, you will create time logs against operations and this will be added to your items value. (and hence direct cogs)

There is no value difference for material transfer (stores > wip)
For wip > finished goods, the difference account should be Cost of Goods Sold

Labour will be an expense (salaries and wages) which gets converted into value (via CoGS) and stays in your assets until you delivery.

9

My understanding by reading about [ERPNext Perpetual Inventory][1]
[1]: Not Found

Green Box in Diagram is what I tried doing and Cash got deducted to pay operations. i.e. selecting Cash A/c as difference account.

My objective is to pay labour & operations by cash.
Generally in my small repair contracts business everything happens in Cash. Cash Ledger records all cash except the cash paid to operations which are to be recorded by stock entry.

CashLedger-ReceiptsPayments.png970Ă—109 22.7 KB

[12] & [13] withdrawn Cash on 23rd and 25th from Bank,
[14] Paid cash to supplier on 26th,
[15] On 28th Stock entry for paying labour by cash.

I tried v5 demo on erpnext.com and saw auto time logs and field which shows difference to be transferred in Difference account, It’s awesome!! Yet for production use I’ll wait for stable release.

Can I keep doing this in v4 Production System or something better can be done?

10

One more idea:

  1. Using BOM without Operations.
  2. Adding Labour as Employee for attendance only
  3. Create Ledger under Direct Expenses for Labour
  4. Use Cash Voucher and select Cost Center to track
11

v5 only a few days away now. Stay tuned.

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