Item Return Costing

For many clients, managing customer returns is an important business activity. In addition to the logistical challenges of approving customer returns and providing customers with a way to send back defective merchandise, an important consideration is ensuring these customer returns are accounted for properly. When a customer returns inventory, it is important that the cost of that inventory is accurately assessed and captured in the books. NetSuite offers several process options to help manage this which we will review on this blog.

How NetSuite Manages Return Costing

There are several ways NetSuite determines the cost on returned merchandise.

• Linked Return Authorization
  • When a return authorization is generated directly from a sales transaction, such as an Invoice, NetSuite will use the same cost captured on the item fulfillment for that sale.
  • This is the recommended method when possible as it ensures the returned merchandise is received using the same cost incurred when it was originally fulfilled.
    

• Stand-Alone Return Authorization
  • Calculated Costing
  • In this scenario, NetSuite will calculate the return cost for you.
  • Keep in mind, since NetSuite is calculating this value, it may change over time. This will typically be dependent on the costing method set for the item.
  • For example, the return cost may be the average cost for the item in that location if average costing is being used as the costing method.

• Fixed Costing
  • You may also set a fixed Default Return Cost on the item record. NetSuite will default this into the Override Rate on item receipt forms for new return authorizations. However, since costs change over time, this method may not produce accurate results as costs change.

Considering Nuances and Exploring Additional Solutions for a Smooth Transition

As always, make sure to perform a full assessment of accounting impact by testing in a Sandbox environment. There is also additional nuance here if you are using multiple units of measure, which involves understanding NetSuite’s use of the stock unit and override rate field. For historical return receipts, there are also third-party tools available such as integrator.io, which offers a free data loader tool which can help you correct previously received item receipts with no GL impact. This can be especially useful if you have a large number of item receipts to correct.

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