CONCEPTS

Returning Items to Vendors

Last Revised: 07/26/22

There will be times when you need to return items to vendors. This may be products you no longer need, or overstocked inventory, items purchased in error, items received not ordered, etc. In any case, you record the items to be returned using Vendor Return Processing. You will also need to record any payment received, restocking charge, and other Vendor Return expense as described below.

Create a new Vendor Return listing the items and quantities to be returned. Dynamo will determine the cost of the return based on the original purchase price. Each Vendor Return is assigned a sequential Vendor Return Number. You may also enter a Returned Material Authorization (RMA) number if the vendor assigned an RMA.

You may print a packing slip listing the products to be returned which can also be used to pick the items and verify that all items have been packed.

Once the shipment is ready, you can scan or enter the bar code on the Vendor Return Packing Slip at your integrated shipping PC (UPS Worldship, FedEx Shipment Manager, Endicia for USPS, etc.) which will print labels for the boxes or other containers being used. You can also return using your own truck, vendor pickup, or common carrier.

Once the shipment is on its way back to the vendor, update the Vendor Return in Dynamo. Dynamo will then calculate the cost of the materials being returned, adjust the inventory, and make a general ledger posting crediting Inventory accounts and debiting Vendor Returns Receivable.

The vendor may issue a credit memo, mail you a check, make an ACH deposit to your bank account, or replace the goods. The vendor may also charge a restocking fee.

If you received a check in the mail, or the vendor made an ACH deposit, then use Cash Receipts Entry/Application/Journal and Update to record the payment amount. You can also enter any restocking fee, and any variance between the anticipated return value and the actual return value provided by the vendor.

Example:

You return $500 of product to a vendor. They send you a check for $400 and charge a Restocking Fee of $40.

Transaction	General Ledger Account	Debit	Credit
Vendor Return Update	Inventory		500.00
	Vendor Returns Receivable	500.00
Cash Receipts Update	Cash	400.00
	Vendor Returns Receivable		500.00
	Restocking Charge	40.00
	Vendor Return Expense	60.00

It is important to always Debit the Vendor Returns Receivable the same amount that was originally Credited when the Return was updated. This is the 500.00 amount shown in red in the example above. Use Vendor Returns Inquiry to obtain the original Debit amount.

Should the vendor issue a credit memo, then use Accounts Payable Invoice Data Entry to record, the memo amount, the Vendor Returns Receivable amount, any restocking fee, and any other Vendor Return Expense required to insure that thee Vendor Returns Receivable account has the same debit as credit.

Should the vendor replace the inventory, then use Inventory Control Transaction Entry using transaction type VRR Vendor Return Replacement Inventory.  Enter the quantity received. You should enter the same cost that was used for the return. Use Vendor Return Processing to obtain the item costs. The Inventory Transaction will post to the same Vendor Returns Receivable account.

Regardless of how the vendor processed your return, the net effect is that the Vendor Returns Receivable account should end up with a zero balance.