This article is Step 4B of Understanding Accounting Integration - Control Accounts > WIP Labor Inventory and WIP Labor Expense 


To see all the steps of Understanding Accounting Integration, please review - Overview - Understanding Accounting Integration


Step 4B - WIP Labor Inventory and WIP Labor Expense




Both the Work In Progress Inventory and Work In Process Expense has to do with the Costing of Technicians and what General Ledger Accounts that are required to be mapped to these fields will be determined based on what Option of the Costing of Technician Hours your Dealership is using



Basically:


  • Option 1 - means that all Technicians would all use the same labor cost rate 


  • Option 2 -  Blackpurl allows Dealerships to indicate to each Technician what their true labor cost rate is and keep a running balance of the Work In Progress (job clocking hours that have not been billed)



For further information, these articles go into greater detail about the Costing of Technician Hours :

If Option 1 is selected for the Costing of Technicians:


  • You will only be required to add a General Ledger for the Control Account - WIP Labor Expense


As the WIP Labor Inventory is not required as you are no keeping a running balance of how much labor has been job clocked (but not billed) in Blackpurl, this field will be hidden 

For WIP Labor Expense - we would suggest BP Applied Technician Wages General Ledger 

The General Ledger Account will be typically set up as an expense to offset the wages that you are paying your technicians




If Option 2 is selected for the Costing of Technician:


  • You will need to have two separate General Ledger accounts to map against WIP Labor Inventory and WIP Labor Expense 



  • For the WIP Labor Inventory, you will need a General Ledger Account typically set up as a Current Asset to keep a running balance of all the job clocking transactions logged onto Service Jobs that are yet to be billed


For the WIP Labor Expense, you will need a General Ledger Account typically set up as an expense to offset the wages that you are paying your technicians


For example - when the technician job clocks their time onto a Customer Order > Service Job, the transaction would include the technician's name and what the Customer Order number is and would be 


Debit - WIP Labor Inventory 

Credit - WIP Labor Expense 


This is an example:



This would then keep a running balance in your WIP Labor Inventory Account to account for the unbilled WIP that your technicians have clocked


When the Customer Order > Service Job is invoiced out, it will reduce the WIP Labor Inventory Account via a journal entry associated with the sales receipt to offset the Cost of Goods sold entry related to the Labor Income or Revenue General Ledger



  • When labor costing by technician is enabled which is Option 2 and Blackpurl default option there are some important considerations 


  • Make sure individual technicians' base labor rate (per hour as per Gross Pay) is correct in User setups


  • Make sure to change this whenever a pay rise (or rare pay reduction) event


  • If overtime is a regular event either (a), calculate an average to increase base pay by (Gross Pay over time) or (b), audit WIP asset account regularly and journal against labor COGS expense. This entails running open service CO report at end of month and using labor totals as WIP labor value (same as stock counting) NOTE: pay period timing will affect this slightly but will even out over the long term. At EOFY a more detailed audit that coincides with the last pay period of the year would be done to 100% prove the trial balance.  Note: Option A will give a more accurate Technician Performance output but requires a  more involved calculation process


  • Irrespective of the overtime situation in your Dealership, an audit of the WIP Labor account should be performed periodically. Depending on the amount of technicians in the department you may decide to do this every month end, or quarterly.

Restrictions

Accounting entries to these General Ledger accounts should only be received from Blackpurl integration

The balance of your WIP Inventory General Ledger in your accounting package should equal the labor costs accrued on Blackpurl open Service Jobs