How do I process a warranty work order?
Softbase has a recommended process for warranty work orders that will need to be billed to a warranty vendor.
First, you will need to have a warranty customer identified and set up in the system. Typically, this customer will be designated as both an internal and external customer in the setup, as seen below.
We also recommend that you set up a Warranty AR account that is separate from the customer AR accounts, as it makes it easier to track and manage warranty items. This account will be flagged as accounts receivable account in the chart of accounts.
You will want to create an expense code for warranty items to be expensed internally. This is done so that the work order is not flagged as a customer sale and is instead expensed internally to the warranty customer and to their warranty AR account. This is set up by creating an expense code to warranty receivables GL account under the warranty customer number.
After creating the expense code, then, you will also want to create a sales code for the warranty items. You will make sure, when setting up the warranty, that the flag is not checked for customer sale so this sale type is not seen as a customer sale. Example below:
Then, when you open a work order, you are able to use your ship to customer as needed, then update the bill to customer to the warranty customer and flag the work order as internally expensed. This will expense to the warranty AR account upon invoicing. After invoicing, you can send the warranty invoice as needed for payment. The invoice will appear in the AR inquiry tab for that customer and will show the full balance of the invoice.
If the invoice will be short paid and you will not receive the full amount of the invoice, you will then expense the balance not paid to a warranty expense account. For example, if I closed the work order for $500 and the payment received is only for $350, then I would post the following to clear that invoice and record the short payment for warranty:
Credit AR for the full $500 balance of the invoice to clear it to zero.
Debit the bank account for the $350 received from the warranty payment.
Debit a warranty expense account for the remaining $150 to balance the journal.
After posting the payment/adjustment, the invoice will clear to zero and roll to history and you will have visibility to the expense information on that work order/how much was adjusted for the warranty claim.
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