Core 365

Description

Core365 is a comprehensive core management solution integrated with Microsoft Business Central, specifically tailored for remanufacturing companies. It enables sales and purchasing teams to add core charges to parts requiring them, seamlessly tracking each core’s eligibility and return status. With Core365, users can monitor core returns and recognize revenue on unreturned cores once they reach expiration, which can be customized globally or at individual customer and vendor levels. Core365 supports the application of multiple eligible cores to satisfy eligibility criteria, ensuring flexibility and precision in core charge management.

Setup

• Chart of Accounts
• General Product Posting
• Core Setup
  • Return Reasons
  • Core Charge Resource
  • Default Core Terms
  • Order Based Eligibility
  • Tolerance
  • Core Invoicing
  • Revenue Recognition
• Items
  • Eligible Core
  • Sales Pricing
  • Purchase Pricing
• Customer/Vendor Overrides

Chart of Accounts

To manage core charges effectively, the first step is to set up specific accounts in your Chart of Accounts. Core-related transactions require careful tracking, as they involve liabilities that may later convert into revenue or expenses.

• Core Liability Account – Used to hold funds from core charges on the sales side. Since these funds may be returned to customers, they should not be considered revenue initially. This keeps them off the Profit and Loss (P&L) statement until revenue is recognized.
• Core Revenue Account – For cores that aren’t returned by customers, this account allows for revenue recognition by transferring funds from the Core Liability Account once expiration occurs.
• Core Payable Liability Account – On the purchasing side, this account tracks cores owed back to vendors, operating similarly to the Core Liability Account. This ensures vendor-related liabilities are separate from operational expenses.
• Core Expense Account (Optional) – For cores not returned to vendors, this optional account allows for expense recognition, mirroring the sales-side revenue process.

Setting up these accounts correctly helps ensure that your financials accurately reflect core transactions without affecting your P&L prematurely.

Create an account for:

• Core Liability
• Core Revenue
• Core Payable Liability
• Core Expense (optional)

General Product Posting Groups

In Business Central, General Product Posting Groups are essential for defining where different types of transactions will post in the general ledger, including sales, purchasing, and inventory adjustments. For effective core management, you’ll need to set up specific posting groups that handle both Core Charges and Core Items.

• Core Charge Posting Group – This posting group will direct core charge transactions to the correct accounts for sales and purchasing. For instance, when a core charge is added to a sale, this group ensures it posts to the Core Liability Account initially and later to the Core Revenue Account if unreturned.
• Core Item Posting Group – Separate from core charges, this group is for transactions related to core items themselves. It directs inventory movements, adjustments, and any associated purchasing costs for cores, ensuring they post to accounts that accurately reflect inventory and core liabilities on the purchasing side.

Setting up these dedicated posting groups enables clear tracking of core-related transactions throughout their lifecycle, providing visibility into the movement and financial impact of both core charges and core items.

This guide focuses specifically on the correct setup of accounts associated with the Core365 application to ensure proper handling of core charges and core items within your financials. While we provide guidance on creating the necessary posting groups for core-related transactions, it’s essential to consult an accounting professional for additional setup of standard transactions and general product posting groups. An accountant can help ensure that all postings align with your business’s financial structure and comply with regional accounting standards and tax requirements.

Select the GL Accounts for the Transactions For Core Charges:

• Choose your Core Liability (deferred revenue) account for Sales Account and Sales Credit Memo Account. These can be the same or different. If they are the same, any returns of product with core charges will debit the same core liability account.
• Choose your Core Payable Liability account for Purch. Account and Purch. Credit Memo Account.
• You must select “Cost of Goods Sold” and “Direct Cost Applied” even though “Cost of Goods Sold” will be $0.00 if set up correctly, and “Direct Cost Applied” will be the offset for the “Purchases” account.

For Core Items:

For the purposes of this guide, we are assuming that the company does not sell core materials directly. This assumption allows for a simpler setup of core posting within the Core365 application, focusing exclusively on core management for internal use or remanufacturing.

If the company does sell core items, however, additional configuration may be necessary. Specifically, utilizing General Business Posting Groups can help adjust postings to distinguish between cores used internally and those sold directly. Please see the section related to setting up return reason codes with General Business Posting Groups.

Core Setup

Core Setup is available from the “Tell Me” search in business central. Click the search magnifying glass and enter “Core Setup” to begin.

Return Reasons

In Business Central, Return Reasons allow you to categorize and track the reasons for returned items, helping to streamline return processes and manage inventory effectively. Return reasons are used on Sales Return Order and Purchase Return Orders to ensure that returns are handled appropriately, whether from customers or vendors.

For the Core365 application, each return reason includes a unique setting: the Check Eligibility flag. When enabled, this flag indicates that items associated with the return reason need to be verified for eligibility before the return can be processed. This is particularly important for core returns, where eligibility might depend on the timing and expiration of the return.

In summary, return reasons in Business Central help categorize returns and ensure proper handling of specific cases, like cores, where eligibility requirements must be checked before a return is allowed. This helps prevent unauthorized returns and maintains the integrity of your inventory and core management processes.

General Business Posting Groups with Return Reasons

Optionally you can setup alternative posting with General Business Posting groups to control posting routines for specific reason codes. This must be enabled in Core Setup.

Setup Core Charge Resource

In Business Central, a Resource can be used to represent the core charge on transactions. By setting up a Resource specifically for the core charge, you can easily track and apply core-related fees separately from the item cost. This allows you to manage core charges as a distinct line item, providing flexibility in reporting, pricing, and managing eligibility, without affecting inventory values directly.

Core charges are generally considered non-taxable because they are structured as refundable deposits rather than direct sales. When a core charge is applied, it acts as a temporary hold or security for the return of a core item, not as revenue. This means the customer is essentially “borrowing” the core item, with the expectation that they’ll return it to receive a refund of the core charge.

From a tax perspective, this distinction matters because:

• Core charges do not represent a sale of goods or services; they are contingent on the return of the core item.
• They are intended to encourage the return of cores, supporting remanufacturing and sustainability efforts rather than being a revenue stream.

Only if the core is not returned and the core charge is retained does it become eligible to be recognized as revenue, at which point it may be considered for tax purposes. However, the initial charge remains non-taxable as it is a refundable deposit, not a taxable transaction.

Configuring Core Setup

• Enables Core Tracking: Enables core tracking system wide for the company file. There are several pre-requisites prior to enabling core tracking.
• Core Charge: Specifies the resource used for core charges. This will be attached to any item sold that requires a core charge. This resource will also have the Core Charge General Product Posting Group applied to it.
• Default Core Terms: This is the system wide default core expiration calculation used by the core application. Acceptable values for this field are date calculations.
  • 30D – 30 days
  • 6M – 6 months
  • 1Y – 1 year
• Order Based Eligibility: Controls how eligibility is consumed for core returns. When off, the system uses a FIFO method, consuming the oldest non-expired eligibility entry across all orders. When on, it consumes eligibility FIFO within each specific order, relieving the oldest eligible entry from that order. If there is eligibility entries generated prior to enabling this feature, those entries are handled FIFO as a single pool of eligibility. All future entries generated with the feature enabled are handled FIFO within their respective order.
• Return Reason Gen. Bus. Posting: Enables selecting a business posting group on return reasons in order to modify sales return order and purchase return order posting GL postings for lines with the reason code specified.
• Core Expiration Tolerance: Adds a grace period to core return eligibility beyond the stated expiration date. For example, with a tolerance of 15D (15 days), a core with a 30-day expiration is eligible for return up to 45 days. This tolerance is applied internally, allowing flexibility without changing the expiration date communicated to customers. Values can be set as date calculations, such as 15D (days), 1M (month), or 1Y (year), extending the eligibility accordingly.
• Separate Core Invoice: This is a global setting that can be overridden at the customer level to create a separate invoice during posting for core charges.
• Gen. Journal Template: In Business Central, a General Journal Template defines the structure for different types of journal entries, such as revenue recognition. The Basic General Journal template is typically the correct selection.
• Gen. Journal Batch: This setting specifies the General Journal Batch where revenue recognition entries will be created for posting. To prevent accidental postings, it’s recommended to select a batch that isn’t used for day-to-day transactions. This keeps revenue recognition entries organized and separate from routine financial activity.
• Core Revenue Account: This field is used in the revenue recognition process to create journal entries that debit the Core Liability Account and credit the Core Revenue Account for unreturned cores that have expired. These entries are generated by running a report, which creates them in the designated journal batch for posting by someone in accounting.

Items

When setting up items that require a core charge in Core365, there are several mandatory and optional configurations to ensure proper tracking and pricing.

• Eligible Core: This is a required setting that specifies which core items are acceptable as returns for the item in question. Often, there are multiple items you or your suppliers are willing to accept as eligible cores for a particular product. These acceptable cores can be set up in the Eligible Core menu, allowing flexibility in the items that can be returned.
• Sales and Purchase Pricing: Core365 requires the New Sales Pricing Experience in Business Central for defining core-related pricing. If you’re using a version of Business Central prior to version 26 (planned for release between April and September 2025), this feature must be enabled in Feature Management.
  • Core Charge: In the sales and purchase pricing setup, there’s a field to specify the core charge amount, reflecting the refundable deposit tied to the return of the core.
  • Core Expiration: This option allows you to set a unique expiration period for core eligibility specific to the item, overriding any global expiration setting if needed.
  • Outright Price: The outright price applies when no core return is expected. This price is typically higher, covering the cost of sourcing a replacement core from the open market.

These settings ensure that core items are properly managed, with flexible return options and pricing structures to accommodate both refundable core charges and outright sales where no return is anticipated.

Eligible Core can be set for all, customers only, vendors only or specific customers and vendors

Add eligible core

Source Type:

• Blank Value: All Customers and Vendors
• Customer: All Customers, No Vendors
• Vendor: All Vendors, No Customers

Sales Prices

Once verified, this should allow a core charge line to attach to the item being sold.

Purchase Prices

Once verified, this should allow a core charge line to attach to the item being purchased.

Customer Specific Overrides

Core Invoice Method:

• Blank: Uses the default setting in Core Setup
• Combined: Overrides default core setup and combines the item and core charge to a single invoice.
• Separate: Overrides the default core setup and separates the item and core charge on separate invoices.

Core Payment Terms: Only applicable if the global Separate Core invoice flag is on or the Core Invoice is set to Separate. Specifies the Payment Terms of the separate core invoice.

Core Terms: This will override the default core expiration calculation. Acceptable values are as a date calculation.

• 30D – 30 Days
• 2M – 2 Months
• 1Y – 1 Year

Vendor Specific Overrides

Core Terms: This will override the default core expiration calculation. Acceptable values are as a date calculation.

• 30D – 30 Days
• 2M – 2 Months
• 1Y – 1 Year

Purchasing Items with Core Charges

With proper setup, adding an item will automatically create a core charge after adding the quantity. You can optionally set the line as “Outright” if pricing is setup to remove the Core Charge.

Eligibility is generated on invoice of the purchase order.

Core Ledger Entries

You can view the status of eligibility from Core Ledger Entries. Entries marked “Open” have not had a return made against them.

Returning Core with Purchase Return Orders

How Eligibility Works for Purchase Return Orders

In Core365, eligibility plays a crucial role in handling core charges and pricing for Purchase Return Orders. Here’s how it works:

1. Finished Goods Returns with Eligibility:
   • When returning a finished good, the system automatically checks for available eligibility despite the return reason code.
   • If eligibility exists, it is consumed according to Core Setup (Order Based or FIFO) (First-In, First-Out) until exhausted.
   • Once eligibility is fully consumed, the system will still allow the return of finished goods, but no core charge will be applied.
2. Core Returns:
   • Core returns are processed one unit per line, allowing for precise handling of pricing adjustments, deductions, or changes in value.
   • For each core return, the system calculates pricing and relieves eligibility according to Core Setup (Order Based or FIFO) (First-In, First-Out) based on available entries.
   • No Eligibility, No Return: If no eligibility exists, the system will prevent cores from being returned, ensuring that only eligible cores are processed.

This approach ensures accurate tracking and processing of core returns and associated pricing on Purchase Return Orders, maintaining flexibility while adhering to FIFO principles.

Purchase Return Order Header Options

Setting a Return Reason on the header of the document will automatically apply this to the lines entered. This is optional but will add efficiency when dealing with a return of only eligible core.

Purchase Return Order Line Options

• Return Reason Code: Indicates if we are checking eligibility
• Eligibility Document No.: Only visible for Order Based eligibility.
• Direct Unit Cost: Supplied automatically when eligibility is present.

Applied Eligibility Entries

Selling Items with Core Charges

Sales: Core Charge Automation and Eligibility

In Core365, the Sales process is designed to streamline core charge management:

1. Automatic Core Charge:
   • When an item with a core charge is added to a sales order and a quantity is specified, the system automatically adds the corresponding core charge to the order.
2. Eligibility Generation:
   • Core eligibility is generated at the time of invoicing, ensuring accurate tracking of cores eligible for return based on the sale.
3. Outright Sales (Optional):
   • If an item is sold outright, meaning no core return is expected, you can set up outright pricing in the sales prices.
   • Selecting this option removes the core charge from the order, applying the outright price instead.

This automation ensures that core charges are accurately applied and managed, while providing flexibility for outright sales when no core return is anticipated.

Sales Return Orders: Handling Core Returns

Core365 simplifies the process of managing core returns through Sales Return Orders, with optional configurations for Order Based Eligibility and Reason Codes to enhance accuracy and control:

1. Core Eligibility on Sales Returns:
   • When a customer returns an item with a core charge, the system checks for available eligibility.
   • If Order Based Eligibility is enabled, the system will consume eligibility FIFO for the specific order associated with the return.
   • If Order Based Eligibility is not enabled, eligibility is consumed FIFO across all orders, ensuring that the oldest eligible entry is relieved first, regardless of order.
2. Reason Codes and Eligibility:
   • Sales Return Orders use Return Reason Codes to categorize the reason for the return.
   • If the Check Eligibility flag is enabled on a return reason, the system verifies that the return is eligible before processing it.
   • This ensures that only returns meeting the core eligibility criteria are accepted.
3. Handling Ineligible Returns:
   • If no eligibility exists for the returned item, the system will prevent the core from being returned, maintaining the integrity of your core tracking and financial processes.
4. Automatic Pricing:
   • Core365 automatically handles pricing adjustments for returns, applying the correct core charge or refund based on eligibility.
5. Finished Goods Returns:
   • When a finished good is returned, the system consumes any available eligibility and refunds the core charge if applicable. If no eligibility remains, the finished good can still be returned, but no core refund will be processed.
6. Core Lines Processed Individually:
   • Core returns are processed one unit per line to allow for precise handling of discounts and value changes. This ensures that each returned core can be evaluated independently, enabling accurate adjustments to its price or condition as needed.

These features ensure a seamless and accurate process for handling core returns on Sales Return Orders, whether you’re using order-based or general eligibility tracking.

Sales Return Order Header Options

Setting a Return Reason on the header of the document will automatically apply this to the lines entered. This is optional but will add efficiency when dealing with a return of only eligible core.

Sales Return Order Line Options

• Return Reason Code: Indicates if we are checking eligibility
• Eligibility Document No.: Only visible for Order Based eligibility.
• Direct Unit Cost: Supplied automatically when eligibility is present.

If an invalid quantity is entered, you will receive an error.

Applied Eligibility Entries

Revenue Recognition

The Revenue Recognition action in Core365 allows you to efficiently manage unreturned core charges. When a core’s eligibility expires, this action generates a journal entry to transfer the core charge from the Core Liability Account to the Core Revenue Account, recognizing it as revenue.

Here’s how it works:

• Run the Revenue Recognition report to identify all expired core eligibility entries.
• The system creates a single journal entry in the designated Gen. Journal Batch for review and posting by accounting.
• These entries ensure accurate financial reporting by properly recognizing revenue for unreturned cores.

This process helps maintain compliance and provides clear visibility into the financial impact of unreturned cores.

To Recognize Core Revenue

Permission Sets in Core365

Core365 includes two distinct permission sets to manage access and control within the system:

• Core365 User:
  • Provides read-only access to core setup activities.
  • Users with this permission set can view configurations such as eligible cores, pricing, and expiration settings, but they cannot make any changes.
• Core365 Admin:
  • Grants full access to core setup and configuration.
  • Admins can create, modify, and manage core-related settings, including eligible cores, pricing overrides, expiration tolerances, and more.

By using these permission sets, you can ensure that only authorized personnel can make critical changes to your core setup, while allowing others to access the information they need without compromising system integrity.