Chapter 16: Other Transactions and Custom Transactions

NetSuite's flexibility is well known and for good reason. When it comes to transactions, no two companies will use them the same way, and some company businesses are so unusual that they need some custom alternatives to the standard transactions. So, in this chapter, we'll explore some of the many other transactions available out of the box or via special configuration.

In this chapter, we will cover the following topics:

• Using Work Orders and Assembly Builds for manufacturers
• Managing Revenue Recognition with Advanced Revenue Management
• Using Cases and Issues for customer support
• Creating custom transactions for special sales and purchases

Your contacts for this work will vary for each of the special transactions described here. By understanding how and when to use them, you'll know how to guide your client to use these transactions when the need arises.

Using Work Orders and Assembly Builds for manufacturers

Generally, manufacturers build the products they sell from components they purchase (that is, raw materials) into finished goods. They purchase the components from their suppliers or might make some of those themselves as well. They process those in various ways (which is work they need to track since it represents an expense) and the result is the product they sell, plus some waste/scrap that's leftover (very frequently). Whether they're making food products or craft items or clothing, all manufacturers follow this same pattern.

Businesses that manufacture products usually have extra requirements around that process. They want to track their steps and costs, especially throughout the process, to ensure they are staying in the black. NetSuite offers a set of transactions for this purpose, so let's explore each of those (that is, making food products, craft items, or clothing) since all manufacturers follow this same pattern. They purchase the components from their suppliers or might make some of those themselves as well. They process these in various ways (which is work they need to track since it represents an expense) and the result is the product they sell, plus some waste.

Assembly items

We need to define both the component items and the finished goods item in the system. The components will typically be set up as inventory items but they can be assemblies as well. The finished goods are set up as Assembly Items. NetSuite understands how these items will be used and includes a lot of features for handling them and accounting for them correctly. For example, if a company makes bakery items for distribution within their local region, they will define inventory items for the salt, flour, baking powder, and so on. Then, they will define assembly-type items for the cakes and muffins they make from those ingredients. For each of these items, these businesses will typically track their costs both from the suppliers and their manufacturing processes.

Work Orders

Whenever the business decides to combine the raw materials (that is, components) for an assembly item to make new finished goods, they will start the process with a Work Order. This is a native NetSuite transaction that's used to tell the people out in the plant, bakery, or other location to make new products.

A Work Order includes fields that allow us to select an Assembly Item in the header, set quantities and locations, and inventory details. This automatically includes the component list for the assembly. The quantities on those lines can be adjusted when that's needed and when the transaction is saved, its status indicates when the workers should start. Some companies need a more fine-tuned process for this hand-off, in which case we can use the WIP/Manufacturing Routing features described shortly.

Assembly Builds

Once a Work Order has been released to manufacturing, steps are followed to create the finished goods out in the plant, bakery, warehouse, and so on. If all the business needs to know is when that processing will be completed, then the next transaction they'll use is called an Assembly Build. This is where we record what was created since that might not always be exactly what we sent out on the Work Order. For instance, let's say there is waste or scrap material leftover in many processes. Woodworkers, for instance, will usually have some small pieces of scrap wood left as they make furniture from a sheet of plywood.

Here is an example of an Assembly Build:

Figure 16.1 – An Assembly Build transaction nearly completed

The Assembly Build is used to record all of this and remove the component items from the inventory while the assembly items are added to it. Forms like these require us to select SUBSIDIARY first and then ASSEMBLY, LOCATION, and the rest of the fields. Remember that with builds, the costing method is already set on the assembly items, so double-check that setting if you're concerned about getting the right GL impact at this stage.

WIP/Manufacturing Routing

When a manufacturer needs to control their process even more tightly, they enable extra features in the system known as Work In Progress (WIP) and Routing. WIP adds transactions to the system, allowing companies to break down the work process into three steps: Work Order Issue, Work Order Completion, and Work Order Close. Having these additional transactions allows the manufacturer to track their raw materials inventories as more than just a work order to the Assembly Build process. They will use each step in NetSuite to indicate which materials have been consumed as each step is processed. So, for instance, if they're making cured hams from raw pork products, and the hams need to cure in one stage for several weeks, they will be able to determine at any moment how much money they have tied up in each step in that process. Those costs can be included in their period closes and reports. When it only takes a day to make a product, the WIP records are less likely to be useful to the business.

Manufacturing Routing takes this idea of breaking down the steps even further. When a company needs to record not just we started the manufacturing and we finished, but which station in the process each work order is currently at, then they can set up routes in NetSuite and use the route steps to record each activity and adjust the costs, if needed, as the work is performed. This is more complicated than just a paragraph can properly describe, but check out the Help pages on Manufacturing Routing if you ever need to include this level of detail in a client's manufacturing process.

From the explanation provided so far, I hope you can see how NetSuite delivers what manufacturers need natively, but we do sometimes need to augment some of those features with SuiteApps and other third-party solutions. Third-party vendors offer other advanced apps as bundles that we can add to an account when we need them. They're listed in the SuiteApp Marketplace, as always.

Next, we'll cover how NetSuite helps companies with special revenue recognition requirements.

Managing Revenue recognition with Advanced Revenue Management

Revenue recognition (rev rec) is an important topic for any company (for-profit or otherwise) that enters contracts of any sort with their customers. The financial industry has settled on standards and practices for accountants to follow around recognizing revenue so that investors, governments, and others can confidently compare financial results from all businesses. In the past, without these standards, it was difficult to know what makes a company stronger or more successful than others, based solely on their financial reports. Companies that sell all of their products or services in a very short-term time frame don't have this problem, since they both bill for their products and receive payments in a relatively short-term time. However, companies who enter into years-long contracts with their customers, such as cable TV providers or software publishers, must follow these rules so that their revenue reporting is predictable and accurate.

For example, think about any contracted service you might have signed up for, where the service's provider delivered it to you over a year or longer. That process might look like this, in terms of the transactions we use to track the contract in NetSuite:

Figure 16.2 – A standard sales order/invoice process for a contract

Companies who charge a flat rate for their service, as a monthly charge for instance, typically have a fairly simple time getting this set up in NetSuite. But companies who sell a general service in advance and then charge customers based on services they receive over time have more work to do. Think about a legal services firm that requires customers to sign up for annual contracts, but then charges each customer for the specific legal assistance they receive. They might have a flat rate for the basics, and they might charge extra for things such as document handling or court filing fees. They need to be able to sell the client one thing (the annual service) but then also charge them for the specific services they received.

At the beginning of the contract's term, the company knows what the full value of the contract will be (excluding those additional charges), but they can't report all that revenue as if it has already been received until they are paid for all of the services. They would be misreporting their real income if they did. It's for this reason that the standards bodies (such as FASB and IASB) have gotten more and more strict about rev rec rules – to control this reporting process. This is a fairly complex topic and requires quite a lot of accounting expertise to get right, but in a nutshell, revenue recognition rules only tell businesses how to report revenue as they deliver the goods or services promised in their contracts over time.

Important Tip

I am not an accountant and have not received the proper training to cover this topic in depth. So, I'll be covering the main NetSuite features you should know about when implementing a client who has to follow rev rec rules in this section, but you should always ensure you're receiving expert guidance from a trained accountant when performing these steps for a client.

For more information on this, outside of the NetSuite Help pages, check out the FASB website: https://www.fasb.org/.

In NetSuite, we have a set of features you should be aware of when implementing any software or services or other types of businesses that need to follow rev rec practices. We'll cover these in the following subsections.

Advanced Revenue Management

This is a comprehensive module we can enable in an account when we need to take advantage of NetSuite's Advanced Revenue Recognition Workflows, Revenue Arrangements, rev rec Rules and Plans, and Fair Value Price tracking.

The feature has a cost associated with it, so a NetSuite sales representative must enable it in an account for us. It's generally the kind of thing we want to know about from the start and plan to include in our implementation. It can be enabled later if the business starts out using classic revenue accounting standards but then needs to adopt rev rec later on, but this is generally difficult and time-consuming. Review Chapter 6, Understanding the Organization's Accounting and Finance, for more on gathering these requirements.

Revenue recognition rules

When you need to follow a rev rec process for some or all of a business's sales, you need to define the rules their rev rec should follow. The accounting standards mentioned in the preceding section dictate most of this, but the system allows for some flexibility in the rule's application. This is what a rev rec rule record looks like, when partially filled in, as an example:

Figure 16.3 – An example of a Revenue Recognition Rule record

Each rule we create indicates a specific time frame the rule will be in effect, indicates any delay at the start before revenue should be recognized, and so on. We apply the rules we create to Revenue Plans and those are associated with individual sales. We can import rev rec rules if we need to create them in bulk, just before going live, for instance.

Revenue arrangements

Arrangements are non-posting transactions that NetSuite typically creates for us when a rev rec plan is in place. Similar to a billing schedule (which controls the schedule that invoices will be created on), a Revenue Arrangement tells the system when revenue should be recognized, so it usually becomes part of the period close process. We can view these records on a sub-tab on the related sales transaction (Sales Order, standalone Invoice, Cash Sale) and users with the right permissions can edit them if needed. They can also be generated via manual processes, for clients who need to take more control.

Revenue allocation

For some companies, in addition to rev rec rules and arrangements, we need to control the process of allocating revenue across sets of items or charges per the business' requirements. For example, if a company sells a Software-as-a-Service (SaaS) product, including user licenses and software maintenance delivered over time, not all of those items will be sold for what the accounting standards refer to as their fair market value. NetSuite gives us a way to allocate the full sales price the customer is paying, spread out over time. Allocation is frequently complicated by what are known as carve-outs and carve-ins, by returns for items, and more.

Amortization

Expenses can be amortized in NetSuite as well. When we enable this feature, we're setting up various transactions that will allow the business to spread the cost of some expenses over time. For many businesses of all types, this helps a lot since the costs of some items are spread out over many months or years, just as revenue can be. For example, if the company signs a contract with a service provider, they might want to record the total they will owe at the beginning, but then defer some of the expense to each month in the future. We can set up Amortization Templates and schedules in an account to define which items/services this applies to and how the deferral should happen.

Here is an example of an Amortization Template, ready to be used with expense transactions:

Figure 16.4 – An Amortization Template, set up for 12 months, evenly allocated

These advanced revenue management features seem daunting at first, but in practice, you can learn them fairly quickly and help clients learn to use them with some guidance. The NetSuite Help system contains a lot of information, including videos you can learn from.

Next, we'll explore another side of the system: customer support.

Using Cases and Issues for customer support

Since NetSuite wants to be the central place each client runs their business from, it makes sense that the system offers features for customer support organizations. The main features worth knowing here are Support Cases and Issues. Cases are used to track communication with a customer and can be created either by the customer or the client's Customer Support Representatives (CSRs). A customer can typically create a Case via email or by completing a web form. The client's employees can manually create cases whenever they need and can also use the CSV import feature to create Cases in bulk, as is common if NetSuite and another system are being kept in sync.

Cases can be used for many purposes, but generally, they should be related to customer support. For instance, their most common use is for tracking questions and reports of problems from customers with products or services they've purchased. But we've also seen clients use Cases for tracking internal employee concerns as well, such as questions about benefits or payslips. (This is why the Company field on the Case form includes both customers and employees by default). The system includes a set of starter statuses, priorities, and types for cases, but those can be easily customized to suit the business' needs. We can also create custom Case Profiles so that companies with multiple subsidiaries can have separately branded messages attached to the cases for each part of the business.

Support Cases can be tied to transactions as well, so that, for instance, a customer who placed an order can contact Support and ask questions or make changes later, before the order is shipped. The CSR who opens the case might not have the SalesOrder# at first, but they can link their Case to the order later via the Related Records tab. Just be careful with this since, out of the box, the system allows any transaction to be linked to any case. Some clients want a restriction on that so that CSRs can only assign transactions to cases for a matching customer.

Issues are related to Cases and are typically used to report problems the company needs to fix. For instance, a software company might use issues to report defects to the product's developers so that they can prioritize and resolve them. A maker of coffee machines might use issues to track customer enhancement requests and physical product defects internally. Issues can be created by customers if Customer Center is in use, or by the client's employees. They can be linked to Cases and have customizable lists for things such as status, priority, severity, and more.

This is what the default Issue screen looks like:

Figure 16.5 – The default Issue screen and its fields

Using Cases and Issues in NetSuite makes sense for many small and medium-sized businesses since the Customer Support data can easily be linked to transactions. It can also be tracked via the same types of reports the rest of the business uses. There are a lot more support-related features here to explore, including the creation of a Knowledge Base and Solutions, and so on. The NetSuite Help pages contain all the necessary information regarding this under the Support Management heading.

These Support-related features and records can be a big help to any client who has a support team and wants them to share the ERP system with accountants, sales teams, and other users. Support Cases and Issues will get them most of the way there. Clients who choose to add Knowledge Base articles and Solutions can complete that picture in most cases.

For the last section of this chapter, we'll take a look at the system's custom transaction features and learn when they are most useful.

Creating custom transactions for special sales and purchases

Since we're talking about special types of transactions in this chapter, we should also take a moment to talk about a little-used but still very helpful feature called custom transactions. NetSuite allows us to create a new, custom type of transaction whenever we need, but we generally only do so when the client has requirements that can't be met with the native transaction types. For instance, if a company wants to track a special type of sales order, we will usually just add a custom list field to Sales Orders, allowing them to be categorized as needed. But in some cases, it makes sense to completely segregate the transactions to their own, new custom type. Think about a business that offers complex financial transaction processing or legal services, for instance. They might balk at the idea of tracking things such as a special kind of long-term debt write-off or arbitration services on a Sales Order. Or maybe a company wants to consolidate their invoices for their clients into something else and then handle those transactions differently from native Invoices. Creating a custom transaction in these cases makes sense and is not too difficult.

Once we enable the SuiteBuilder Custom Transactions feature, we can define the type based on several Styles. NetSuite offers a basic style, a Journal style (with debit and credit lines just like a Journal Entry), a Header Only style (which requires the creation of a custom GL plugin script), and Sales or Purchase styles, for when the transaction should act almost like a Sales Order or Purchase Order.

In one project I worked on, a customer wanted to take Sales Orders from customers as most companies do. But then they wanted to consolidate the items from those orders onto a special transaction they called an Outbound Shipment. In their business, this was critical since their orders tended to be large and to include a great variety of items, and shipping those orders involved combining items across orders based on ever-shifting product availability. The rule we put in place was that shipping could only happen from one of these Outbound Shipment transactions. We created a custom sales-style transaction type for this purpose and set up customizations (scripts, workflows, and integrations with the warehouse management system) for those. This allows the client to track their sales and shipments in two separate lists in NetSuite, and this approach made the most sense to the managers and users who had to work in the system. Having a custom transaction type also gives users more control over access permissions and reporting abilities.

Keep this custom transaction feature in mind for those special cases that arise every so often with clients whose businesses don't fit into the native transaction use cases. It's also handy to use a custom transaction when it feels like you're stretching the normal meaning and use of a native transaction.

Summary

This chapter shows you how NetSuite gives businesses so much room to stretch out and make their accounts unique to their processes, while also adhering to global accounting standards. You should now know how NetSuite extends its core financial, purchasing, and sales features to cover as many other related business processes as it possibly can. Work Orders and their related transactions give manufacturers the same access to quality data as other businesses get with the basics. Revenue tracking records and transactions give software and services businesses a leg up on their competition. Support Cases and Issues give the customer service teams within the business a place to track their work, and custom transactions allow us to extend the system even further.

In the next chapter, we'll take a look at how all this data inside NetSuite can be put to use, helping clients make decisions and plan for the future.

Self-assessment

Take a minute to see if you can apply what you learned in this chapter to a few situations you might run into in the field. Think about how you would handle each of these cases. There is no single right answer for most of these:

1. Your client is not using any of the manufacturing features yet since they are primarily a distributor of packaged consumer goods. They ask you for help with tracking a multi-step process they follow on the warehouse floor when items are bundled together from a shortlist of small components into gift baskets. How do you help them decide whether they need Work Orders and Assembly Build transactions for this, or whether they could get along with something simpler?
2. ABC Co has a fleet of trucks they use for deliveries, but occasionally their demand is high enough that they have to rent trucks for a day or two as well. They've contracted with a local company to rent short-term trucks when they need them. They will pay a flat rate per month for access to the vehicles and then a per-mile cost plus gas whenever they use one. Which NetSuite features can help them manage and track these expenses?
3. During implementation, your client learns about the NetSuite Knowledge Base feature and asks for help setting it up and getting all of their existing articles from another system into their NetSuite account. What's the right level of assistance in cases like this? For instance, should you offer to convert the data for them into NetSuite format?
4. Your customer wants to tag certain transactions as being part of a beta program they're running with certain customers. They want to be sure that every transaction that's created within this program is tagged this way; this will allow them to easily differentiate the results on financial and other reports. Is this a good use of custom transactions, or is there another NetSuite feature that might help the company more?