Revenue recognition bundles

Note

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This article describes the bundle functionality that's included in the revenue recognition capability in Accounts receivable. A bundle comprises a parent item and multiple component items. Enter the parent item on a sales order to make order entry more efficient. However, the system explodes the parent item into the component items. Internal documents, such as the packing slip, list the component items. However, external documents show only the parent item.

Note

Microsoft Dynamics 365 Commerce channels, such as online, point of sale (POS), and call centers, don't support revenue recognition (including the bundle functionality). This also includes the Prospect to cash solution for Dynamics 365 Supply Chain Management and Dynamics 365 Sales. Items that are configured to use revenue recognition shouldn't be added to orders or transactions that are created in Commerce channels or in the Prospect to cash solution.

To set up bundles, enter the configuration keys for revenue recognition. However, you can use bundles even if you don't set up revenue recognition. Likewise, you can use revenue recognition if you don't set up bundles. If you set up revenue recognition, the component items determine the revenue price and the revenue schedule that the system uses for revenue recognition or deferral when a sales order is invoiced.

The setup for bundles uses the bill of materials (BOM) functionality. For information about how to set up a bundle item, see Revenue recognition setup. If you flag the parent item as a bundle, the system treats it differently than other BOM items. Here's a list of the differences:

• Bundles must be exploded through sales order confirmation, by selecting Confirm sales order on the Sell tab of the Action Pane on the sales order page. Bundle items must never be exploded by selecting BOM line under Explode on the Sales order line menu on the Sales order lines FastTab. Otherwise, the item is treated as a BOM, not as a bundle.
• You must confirm a sales order that contains a bundle item before you create the packing slip or invoice.
• When you explode a bundle through sales order confirmation, the system cancels the parent item and allocates its unit price and discounts to the component items of the bundle.
• The sum of the component items must always equal the price on the parent item. Therefore, there are limitations on the fields that can be updated or changed for component items. For example, the unit price can't be manually changed. It also can't be indirectly changed by making a new price agreement go into effect. To prevent a new price agreement, inventory dimensions can't be changed on the component items.
• When an external-facing document such as the sales order confirmation or invoice is printed, the parent item is printed, not the component items.

Bundles on sales orders

The USMF demo company includes the following bundle setup. All setup for revenue recognition, such as the setup of revenue schedules, is removed from the items that are included in this scenario.

Parent item: Laptop bundle

• Component item: A quantity of 1 of item 1000
• Component item: A quantity of 1 of item S0021
• Component item: A quantity of 1 of item Support

The base sales price of the component items is an essential part of the setup of the components. You define the base sales price on the Sell FastTab of an item. It's used to calculate the allocation factor when the parent item's unit price is allocated to the component items. The trade agreement sale prices are never used for this purpose.

The following base sales prices are defined for the component items:

• 1000: $1,900.00
• S0021: $150.00
• Support: $500.00

A sales order is entered for customer US-004, Cave Wholesales. The only line that is entered is for the Laptop bundle item. The default unit price for the parent line can be taken from numerous places, such as the trade agreement or the base sales price. In this example, $2,300 was manually entered as the unit price.

Because the sales order contains a bundle, you must confirm it. The confirmation dialog box shows the components of the bundle.

However, the printed confirmation report shows only the parent item of the bundle, because that report is the external-facing document for the customer.

After the sales order is confirmed, the parent item is still shown on the sales order, but its status has been changed to Canceled. Additionally, the net amount is tracked in the Bundle net amount field. This amount is required to print the invoice, because the invoice shows the parent item, not the component items.

The sum of the component items must equal the Bundle net amount value of the parent item, because that value is the amount that is presented to the customer on the printed invoice. To ensure that the invoice matches the amounts that are posted to the general ledger, edits to the component items are limited. For example, you can't change the site and warehouse, because those changes might trigger a price change, based on a trade agreement.

The unit price from the line for the parent item is allocated to the components in the following manner:

Total base sales prices from components: $1,900 + $500 + $150 = $2,550

• Component 1: $2,300 × (1,900 ÷ 2,550) = $1,713.73
• Component 2: $2,300 × (500 ÷ 2,550) = $450.98
• Component 3: $2,300 × (150 ÷ 2,550) = $135.29

The sum of the components must equal $2,300, and it does ($1,713.73 + $450.98 + $135.29 = $2,300).

If changes are required for all component items, the parent item can be removed. In this case, the component items are also removed. The parent item can then be added again, and the required edits can be completed before the sales order is confirmed.

When the sales order is picked and packed, the documents include only the components of the bundle. The packing slip and invoice must include a full bundle. Otherwise, they can't be posted. For example, the dialog box shows three component items. If you try to delete one of them, you receive an error message that states that all products in the bundle must be shipped before they can be invoiced.

A bundle must be shipped and invoiced as a full bundle. For example, if you change the quantity of item 1000 to 4, but you leave the quantity of the other component items at 5, the packing slip and invoice can't be posted.

A partial amount can be shipped and invoiced only if the quantity is reduced for all components of the bundle. For example, a quantity of five of the Laptop bundle item is entered on a sales order. After the sales order is confirmed, the three component items are shown on the sales order, and the quantity of each is 5. By default, during shipping and invoicing, the quantity is set to 5 for each component. However, you can adjust the quantity down to 3 for all three component items. In this case, three full bundles are shipped. The remaining two bundle items (a quantity of two of each of the three component items) can be shipped and invoiced later.

The final step is to invoice the sales order. During invoicing, the invoice dialog box shows the component items.

However, the printed invoice shows only the parent item.

The invoice journal that you create after posting doesn't include the parent item from the bundle, because that item has a status of Canceled.

It's important that the invoice journal doesn't include the parent item from the bundle, because any processes that you perform after the invoice is posted are based on that invoice journal. For example, if you create a credit note from the Sell tab on the Action Pane, the credit note that you create includes the component items but not the parent item.