How to Record Vendor Expenses in Dynamics 365 for Financials

There are a couple of options for recording vendor expenses in Dynamics 365 for Financials: (1) use Journals or (2) use Purchase Invoices along with Service Items. That said, I think only the Purchase Journal method makes sense. I’ll clarify why below.

Option 1 — Use Journals

This is by far my preferred method because it’s simpler and requires less initial setup. The basic steps are as follows: (1) open the Purchase Journal, (2) set up your journal lines and (3) run the Post function.

CRONUS US Example

Basic Scenario: Record a $2,500 rent invoice payable to AR Day Property Management

More Scenario Info:

  • Rent Expense GL Account = 60100
  • AR Day Property Management’s Vendor = 20000
  • The AR Day Property Management Vendor is configured to post to the Accounts Payable G/L Account, Account No. 20100.

Prerequisites: a Vendor record must be set up for AR Day Property Management (with a proper Vendor Posting Group) and G/L Accounts to record the expense and liability, accounts 60100 and 20100 respectively.

Purchase Journal Processing Method

Use the Purchase Journal to record the expense to G/L Account 60100 and the liability to Vendor 20000 (Note: all the highlighted values are needed). Click the Post button.

vendor1

Posting the transaction above resulted in the following G/L Entries:

vendor2

Notice the debit to the 60100 (Rent Expense) account and the credit to the 20100 (Accounts Payable) account. This is just what we wanted.

Option 2 — Use Purchase Invoices and a Service Item

Note: I do not recommend using this method to post Vendor expenses because it requires maintaining several additional pieces of setup information for every expense G/L Account you want to record expenses against (which can be a lot of G/L Accounts). For every expense G/L Account to which you post, you need to set up one Gen. Prod. Posting Group, at least one General Posting Setup record (possibly several) and one Service Item.

For example, if an invoice comes in for a new type of expense and you don’t already have a G/L Account set up for tracking the expense, you need to set up a new G/L Account. No issue there — That’s common. However, you also need to set up a new Gen. Prod Posting Group, one or more General Posting Setup records and a new Service Item. This is more complicated than it is helpful. That’s why I suggest just using the Purchase Journal Method noted above.

CRONUS US Example

Basic Scenario: same as above

Prerequisites: same as above, plus the following:

  • General Product Posting Group: NAV needs to be set up with a General Product Posting Group for each expense account that will be used on a Purchase Invoice.

vendor3

  • General Posting Setups: A new General Posting Setup record needs to be set up for each Posting Group that will be used on Vendor records. In this case, I’ve created two new General Posting Setup records and pointed their Purch. Account and Purch. Credit Memo Account fields to the 60100 (Rent Expense) G/L Account as shown below:

vendor4

  • Service Item: needs to be set up so you can choose the item on the Purchase Invoice. Includes the following:
    • Description = whatever’s appropriate
    • Type = Service
    • Base Unit of Measure = whatever’s appropriate
    • Prod. Posting Group = the new Gen. Prod. Posting Group setup above

vendor5

Purchase Invoices Processing Method:

Use the Purchase Invoice to record the liability to Vendor 20000 and the expense to Item 1001. Click the Post button. The highlighted values are the fields I used to record my liability and expense.

vendor6

Posting the Purchase Invoice above resulted in the following G/L Entries:

vendor7

Notice the debit to the 60100 (Rent Expense) account and the credit to the 20100 (Accounts Payable) account. This is again just what we wanted, but it took more setup work to get there.