Proper Use of Descriptors
What are Descriptors used for?
Descriptors are used for the following purposes:
Service Labor & Misc Charges
Let’s examine these in detail and also discuss the improper use of Descriptors.
Every manufacturing company has purchasing requirements outside of jobs and inventory. In DBA we refer to non-job, non-inventory purchases as “miscellaneous” purchases.
PO’s are not required
You do not have to use purchase orders for all purchases. When you go to an office supply store, for example, the store does not require a PO. You would make your purchase and enter that purchase later in the Supplier Invoices screen, charged to the appropriate GL account. Many miscellaneous purchases and most expenses are entered in the Supplier Invoices screen without a formal PO.
Descriptors are used with PO’s
Some companies prefer to process miscellaneous purchases through a PO. This enables the PO to be used as a requisition that imposes some control over what is being purchased and who has permission to do it. When PO’s are used, Descriptors are entered to represent the miscellaneous items being purchased.
Have Descriptors represent GL accounts, not items
The easiest way to use Descriptors in PO’s is to have them represent GL accounts rather than specific items. For example, one Descriptor for your “Office Supplies” GL account can be used for all such purchases. When you enter a PO line item, over type the Description to describe the item being purchased and enter the applicable cost, if known.
TIP: If your purchasing personnel think in terms of GL accounts, consider using the GL account as the Descriptor ID or incorporate the GL account into the descriptor’s Description.
If you use Descriptors as GL accounts, the number of Descriptors required is relatively few in number. At the other extreme, you have the option of creating a Descriptor for each miscellaneous item you purchase, in which case you may have hundreds of Descriptors.
The Account Assignments screen gives you complete control over Descriptor posting. On the Purchasing tab, there is a Misc Purchases expense account setting. All your miscellaneous purchases will post to this account by default, unless you make exceptions for specific Descriptors on the Exceptions sub-tab. So if the one account is all you need, use the default account and no further setup is required. On the other hand, if you wish to post some or all of your Descriptors to specific accounts, do so on the Exceptions sub-tab.
Update costs in PO Receipts
When PO’s are used as requisitions, you often don’t know what the actual costs are until after the miscellaneous items are purchased. For example, if you create a PO first and then send an employee to the office supply store, you won’t know the actual costs until that person returns with a receipt. In the PO Receipts screen, you can enter the Cost at the same time you enter the Rec Qty.
Service Labor & Misc Charges
Descriptors can be used in sales orders to bill customers for labor or miscellaneous charges.
If you charge customers for service labor on invoices, labor is set up as a Descriptor and is entered as a sales order line item. You might set up several labor Descriptors, each with a different Base Price, if you charge different rates for different services.
Any other charges that might be included in your invoices, whether they are for shipping, engineering fees, permits, etc., can be set with Descriptors and prices. Any price can be overridden at the time of sales order entry.
The Account Assignments screen gives you complete control over sales order posting of Descriptors. On the Sales tab is a default Sales account. All sales of Descriptors and Stock Items post to this account unless you define exceptions on the Exceptions sub-tab.
The Exceptions here are slightly different than the Purchasing exceptions described above because they are by Item Category rather than individual Descriptor. Otherwise, the principle is the same. You can use the default account or you can define Exceptions for some or all of your Item Categories.
WARNING: Do not use Descriptors for raw materials and components
A harmful practice that we see from time to time in support is the attempt to use Descriptors instead of Stock Items for purchases of job materials and components. This practice causes problems with the planning system, costing, inventory, and accounting. Usually it’s an attempt to use DBA like a prior system. DBA is designed to handle work in process and inventory in a very specific way. The only way to achieve success is to use the system as designed. Descriptors should never be used to represent raw material or components.
“Stock” Items do not have to be stocked
Some people assume that a Stock Item, because of the word “stock”, refers to items that are purchased for stock. Therefore, they conclude that material and components purchased for jobs are therefore “non-stock” items.
This is not correct. A Stock Item is capable of being stocked, but may or may not ever actually be stocked. Stock Items have many more capabilities than Descriptors (including item labels, barcodes, tracking characteristics, last cost, inventory cost, reorder levels, etc.) and should always be used for all raw material and component purchases.