Chapter 6: Vendor Returns: Objectives

Chapter 6: Vendor Returns
CHAPTER 6: VENDOR RETURNS

Objectives
The objectives are:
• Create a vendor return by using a negative quantity, the create credit

note feature, and the purchase order type returned order.
• Return a group of items with multiple serial and batch numbers to a
vendor.
Introduction
Companies frequently return items to their suppliers when, for example, the
goods are the wrong size or color, the expiration date has passed or the goods are
damaged during transportation, or because of a wrong handling.
Vendor item returns are handled the same as purchase orders, because they
involve transactions in the Inventory and warehouse management, General
ledger, Procurement and sourcing, and the Accounts payable modules.
Vendor Returns discusses how to return a product to a vendor. You will be

shown how to handle the returns with and without serial and batch numbers
attached.
You can create vendor returns for items stocked and those that are not in stock.
6-1
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Distribution and Trade in Microsoft Dynamics® AX 2012
Create Vendor Returns

Certain modules are affected when you use the Vendor returns feature.
FIGURE 6.1 MODULES AFFECTED BY VENDOR RETURNS
Companies can issue vendor returns for various reasons, such as for damaged
products or perhaps the vendor shipped the incorrect product. You must issue a
vendor credit note when items are returned to the vendor. The following table
shows the three methods that are available to create vendor credit notes.
Method Description
Use a negative quantity A purchase order line for an item with a
(Create a PO line) negative quantity.
Copy the original The credit note is created from the original
purchase invoice purchase invoice.
Returned order purchase The purchase order type is selected as a
type Returned order and not as a purchase order.
6-2
Negative Quantity
The first method to create a vendor return is to specify a negative quantity on the
purchase order line in a new or existing purchase order. Typing a negative
quantity in the purchase order line has the same effect as if you are actually
selling from your inventory to the vendor that you want to return the items to.
Companies can use the Negative quantity method, for example, when a return is
made to a vendor and no reference to a specific purchase order or Return
Merchandise Authorization (RMA) number is required.
Procedure: Negative Quantity

To create a vendor return by using a negative quantity, follow these steps.
1. Open Procurement and sourcing > Common > Purchase Orders

> All purchase orders.
2. Click Purchase Order on the Action Pane to create a new purchase
order.
3. Click OK.
4. In the Purchase order form, select an item number and type a
negative value in the Quantity field to indicate that this is an item
return.
HINT: You can indicate a specific return action by going to the Setup tab on the
purchase order line and selecting a Return action in the Returned order field
group. The return action is for information only and has no functionality on the
vendor return.
5. When the negative quantity is entered, click the Purchase tab on the
menu bar and then click Confirm.
6. Close the Infolog or optionally generate the packing slip (this might
be used as the product receipt and be required if the item is
associated with an item model group where Deduction
requirements is selected).
7. Click the Invoice tab on the menu bar and then click Invoice.
8. Change the Default quantity for lines field to Ordered quantity (or
Product receipt if the packing slip is generated).
9. Enter a number in the Invoice identification number field.
10. Save the record.
11. On the Action Pane, click Post.
The invoice is now posted and the system records the items as being removed
from the system. To verify this, click Inventory > Transactions from the
purchase order line. Notice the negative quantity, and that the Issue column is set
to Sold to indicate the items leaving the inventory.
6-3
Copy Original Purchase Invoice

Another method to issue a vendor credit note is to generate purchase order lines
by copying a previously posted purchase invoice. The copy feature is time saving
because it prevents you from having to enter the original purchase information
again.
Use this method when you must match a credit note to an original purchase
order. Use the original pricing when you copy the original purchase order. This
eliminates any variance that can occur if the purchase price changes after the
original order is invoiced.
In addition, when you copy the purchase order, the system makes sure that the
return quantity does not exceed the original quantity received from this purchase
order.
Procedure: Copy the Original Purchase Invoice

To create a vendor return by copying the original purchase order, follow these
steps.

> All purchase orders and create a new purchase order for a return.
You can also select an existing open order.
2. Click the Purchase tab on the menu bar and then click Create credit
note.
3. The Create credit note form lists posted invoices from the specific
vendor on the Invoice tab; and for every header, the lines are shown
in the bottom pane.
4. Highlight the invoice number from which you want to create a credit
note.
5. Select the Mark check box for the item that you want to return, and
then update the Quantity field.
6. Click OK and your negative line item is created in the Purchase
order form with the line that you selected. Notice the quantity is a
negative number that indicates that it can be used to create a credit
note.
NOTE: You can only copy one invoice for each credit note by using this feature
on the header. If you create a credit note by using the feature on the purchase
line level, you can select multiple invoices.
6-4
HINT: Select the Select All check box on the invoice header and all the purchase
order lines will be copied to the credit note. If you do not want to select all the
purchase lines, select the Mark check box on the appropriate purchase lines.
Make sure that you have the correct header selected before you select the
individual lines.
Procedure: Post the Return

To post a return, follow these steps.
1. When the credit note is created, you can indicate a return action on
the Setup tab for each purchase order line. This is optional.
2. To post the return, click Posting > Invoice.
3. Specify the invoice number on the Posting invoice form and then
click OK. The credit note is now invoiced.
4. To verify the transactions, select the line for which you want to view
the transactions, and then click Inventory > Transactions. Notice
Sold is specified in the Issue field and the quantity is negative. This
means the item is removed from inventory.
Returned Order Purchase Type

The third and final way to issue a vendor credit note is to create a purchase order
by using the order type Returned order.
NOTE: This is the only method in the Account payable and Procurement and
sourcing modules where you must enter an RMA number and a Return action.
The RMA number is a reference used for tracking purposes and is typically
issued by the vendor when you return goods to them. This number acts as a pre-
approval number with which to return goods.
Scenario: Returned Order Purchase Type

At Contoso Entertainment Systems, the Purchasing Manager wants all
Purchasing Agents to have an RMA number associated with a return before any
physical stock is moved. To support this requirement, all Purchasing Agents must
tag vendor return orders with the vendor RMA number and use the purchase
order type Returned order when they create a return.
As an added benefit, the Returned order type checks that the quantity is negative.
This minimizes data entry errors.
6-5
Procedure: Create a Returned Order Purchase Type

To create a vendor credit note by using the order type Returned order, follow
these steps:
1. Open Procurement and sourcing > Common >

Purchase Orders > All purchase orders and create a new purchase
order.
2. In the Create purchase order form, select the vendor for which you
want to return items.
3. In the same form, select Returned Order in the Purchase order type
drop-down menu under the General FastTab. Notice the RMA
number field appears in the References section. You must fill in the
RMA number at this point. Typically you have already been in
contact with the vendor and have received this number.
4. Click OK to create the Purchase order.
5. Create a new purchase line and select the items to return and enter
the quantity with a negative sign.
6. On the Setup tab on the purchase order line, select Return action. If
a return action is not selected, an error occurs when you try to post
the invoice.
7. Now the order is ready to be confirmed by clicking the Purchase
tab, and then clicking Confirm.
8. Generate the invoice by clicking the Invoice tab and then clicking
Generate.
9. Change the Default quantity for lines field to Ordered quantity.
10. Enter a number in the Invoice identification number field.
11. Save the record.
12. On the Action Pane, click Post.
The credit note is fully invoiced. Click Inventory > Transactions to view the
posted transactions. Notice the quantity is negative. This indicates the items are
removed from inventory because of the posted return.
Create Vendor Returns for Serialized Items

When you return a serialized item to the vendor, you must specify the item's
serial and batch number on the purchase return order line. This makes sure the
correct serial/batch number will be removed from inventory and also indicates to
the vendor which serial/batch numbers are returned.
To return items to a vendor, the same three options are available for serialized
and nonserialized items.
• Negative quantity
• Copy the original purchase invoice
• Returned order purchase type
6-6
Scenario: Vendor Return for a Serialized Item

Contoso Entertainment Systems ordered and received five lamp transformers
from vendor 1103, Fog Projectors.
After inspection, four of the lamp transformers are defect and must therefore be
returned to the vendor. These transformers are serialized so identification of
which one is returned is important. By using the order type Returned order, the
Purchasing Agent can generate the negative purchase order appropriately.
Procedure: Create a Returned Order for a Serialized Item

To create a Returned item order line for a serialized item, follow these steps.
1. Create a new purchase order and purchase order line for an item that
is serialized. Make sure that you type a negative quantity and the
Purchase type is Returned order.
NOTE: If you only return one item or one batch where only one serial or batch
number is required for the purchase order line, you can select these numbers
directly from the line, from either the Serial number field or the Batch number
field.
2. Click Inventory > Reservation to specify the serial numbers.

The Reservation form shows the serial numbers available in the
warehouse of the purchase line.
NOTE: If the field Serial number is not available in the Reservation form, click
Inventory dimensions display and select the Serial number check box, and then
click OK.
3. Select the serial numbers that you want to return to the vendor by
entering the quantity requested in the Reservation column for the
appropriate serial numbers. Notice that you can only select as many
serial numbers as specified in the Quantity field of the purchase
order line.
4. Close the Reservation form.
5. Select a Return action on the Setup tab under the Returned order
field group and invoice update the credit note.
When the purchase return is posted, verify the correct serial/batch numbers are
removed from inventory. To do this, click Inventory > Transactions on the
Purchase order line. The Serial number field displays which serial numbers are
selected and the Issue field displays the status as Sold.
6-7
Scenario: Vendor Return with Items from Two Batches

Contoso Entertainment Systems has made an agreement with vendor 1103 – Fog
Projectors, to return ten Lamp transformers because the items are defective.
Defective transformers are received on two purchase orders, and from two
batches. For tracking and statistical accuracy, the purchasing agent will use the
create credit note method for this return.
Procedure: Create a Vendor Return from Two Batches

To return items to a vendor from two purchase orders and two batches, by using
the create credit note functionality, follow these steps.
1. Create a new purchase order for the vendor that you will return the
items to.
2. To copy an original purchase order, highlight the purchase order,
click the Purchase tab on the menu bar and then click Credit note
on the Action Pane.
NOTE: You can also access the Create credit note functionality from the
purchase order lines.
3. In the Create credit note form, highlight the purchase order that you
want to return from.
4. In the line for this purchase order select the Mark check box and
update the quantity.
5. Highlight the second purchase order that you want to return items
from.
6. On the line for the second purchase order, select the Mark check box
and update the quantity in the Quantity field.
NOTE: Make sure that the Delete purchase lines check box is clear, because
removes existing lines on the purchase order when the new line is copied to the
return order.
7. Click OK and the information from the original purchase order is

copied into the new purchase order.
NOTE: When the information from the original purchase order is copied to the
new order, you can still edit the quantity of the purchase order if you want to
return a different quantity.
6-8
Procedure: Reserve Batch Numbers to be Returned

The batch numbers can be selected on each purchase order line in the Batch
number field. However, we recommend that you reserve the batch numbers for
the item return instead. To do this, follow these steps.
1. Highlight the first purchase order line and then click Inventory >
Reservation. The Reservation form shows the batch numbers
available for the warehouse of the purchase line.
2. Items have already been deducted from a batch and from the
available inventory. However, changes can be made to this, if for
example the items must come from another batch or from two
batches.
3. Specify changes to the batch numbers.
4. Delete the quantity specified in the Reservation column by
highlighting the number and clicking Delete.
5. Select the batch numbers to return to the vendor by entering the
quantity requested in the Reservation column for the appropriate
batch numbers.
6. The purchase order number associated to each batch is shown at the
bottom of the screen when a line it is highlighted on the Overview
tab.
7. Close the Reservation form.
8. From the Purchase order form repeat steps 1 through 7 for other
purchase order lines.
9. Now the purchase order is ready to invoice update and when the
posting is completed. Verify the system removed the correct batch
numbers from the inventory. To do this click Inventory >
Transactions.
Inventory Pick
Instead of reserving the serial and batch numbers, you can also do a pick by
going to Update line > Pick from the purchase order line.
The benefit of making a reservation is that the items that you want to return are
reserved at the warehouse and the same items are not available for other people
to reserve or pick. Notice that if the item has Picking requirements selected in
the inventory model group, picking must also be performed in a credit note.
6-9
Lab 6.1 - Working with Vendor Returns

Contoso Entertainment Systems - Company CEU
Scenario
Contoso Entertainment Systems regularly orders lamps for LCD Video Projector
Model 02, item number 1508, from vendor 1103, Fog Projectors.
• After discussing the matter with the vendor, it is agreed that the
defective items will be returned with reference to the same PO.
• A negative line is added to the PO for (minus) 10 of item 1508.
• The product receipt is generated and the defective items are returned
to the vendor.
Challenge Yourself!
Your task is to return the defective items with reference to the same PO.
Need a Little Help?
• Create a purchase order header for vendor 1103, Fog Projectors.

• Confirm the purchase order.
• Create a product receipt.
Step by Step

> All purchase orders
order.
3. Select Vendor account 1103.
4. Click Yes to transfer information from the vendor.
5. Click OK.
6. Select item 1508.
7. Type "-10" in the Quantity field.
8. Click the Purchase tab on the menu bar and then click Confirm.
9. Close the Infolog.
10. Click the Receive tab and then click Product Receipt.
11. Type "22" in the Product receipt field.
12. Click OK, and then close the Purchase order form.
6-10
Lab 6.2 - Complete a Vendor Return Using Returned Order

Type
Contoso Entertainment Systems - Company CEU
Scenario
The purchasing agent at Contoso Entertainment Systems has contacted vendor

1103, Fog Projectors for a Returned Merchandize Authorization (RMA) number
for batch 000003 of item number 1706, to approve the return. This item did not
pass the quality control.
The return must have a batch number identification to be accepted by the vendor.
Fog Projectors provides the purchasing agent with the RMA number AS2512 and
you will use your generic invoice number of INV123.
Challenge Yourself!
1. Create a Purchase order with the order type Returned order by using
the specifications that is written in the scenario.
2. Make a reservation for batch number 00003.
3. Post the invoice.
Need a Little Help?
• Create a new purchase order and change the order type to Returned
order after you select the vendor.
• Remember to specify the RMA number, AS2512.
• Use Inventory > Reservation to view and select batch numbers.
• If the Batch number field is not displayed in the Reservations
form, click Inventory > Dimensions display and select the Batch
number check box.
Step by Step

> All purchase orders.
order.
3. Select Vendor account 1103.
4. Click Yes to transfer vendor information.
5. Click the General FastTab, and then click the Purchase type arrow,
and then select Returned order.
6. In the RMA number field, type AS2512.
7. Click OK.
6-11
8. Click the Item number arrow, and then select 1706.

9. Tab to the Quantity field, and type -1.
10. Click Inventory > Dimensions display.
11. Select the Batch number check box.
12. Click OK.
13. Type "000003" in the Batch number field on the purchase order
line.
14. Click the Purchase tab in the Action Pane and then click Confirm.
15. Close the Infolog.
16. Click the Invoice tab on the menu bar and then click Invoice.
17. Change the Default quantity for lines field to Ordered quantity.
18. Type "INV123" in the Number field in the Invoice identification
field group.
19. On the Action Pane, click Post > Post.
20. Close all the forms.
6-12
Summary
Returning an item to a vendor is handled like selling from inventory to the
vendor to whom the items must be returned.
The three ways to create a vendor return are as follows:
• Negative Quantity: A return action that is made when there is no

specific reference to the original purchase order requiring the RMA
number.
• Create credit note: A copy of the original purchase order
information.
• Returned order purchase order type: The only vendor return that
requires an RMA number and a Return action.
To return items to a vendor, the same three credit note options are available for
serialized and nonserialized items.
6-13
Test Your Knowledge
Test your knowledge with the following questions.
1. When you return a serialized item to a vendor, do you have to specify the
serial number that is being returned?
( ) Yes
( ) No
2. What are the three methods for vendor returns? (Select all that apply)
( ) Negative quantity
( ) Copy Original Purchase Invoice
( ) Return order purchase type
( ) Negative packing slip
6-14
Quick Interaction: Lessons Learned

Take a moment and write down three key points you have learned from this
chapter
1.
2.
3.
6-15
Solutions
Test Your Knowledge
1. When you return a serialized item to a vendor, do you have to specify the
serial number that is being returned?
( ) Yes
(•) No
2. What are the three methods for vendor returns? (Select all that apply)
(√) Negative quantity
(√) Copy Original Purchase Invoice
(√) Return order purchase type
( ) Negative packing slip
6-16

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Chapter 6: Vendor Returns

CHAPTER 6: VENDOR RETURNS

• Create a vendor return by using a negative quantity, the create credit

Vendor Returns discusses how to return a product to a vendor. You will be

Create Vendor Returns

FIGURE 6.1 MODULES AFFECTED BY VENDOR RETURNS

Procedure: Negative Quantity

1. Open Procurement and sourcing > Common > Purchase Orders

Copy Original Purchase Invoice

Procedure: Copy the Original Purchase Invoice

1. Open Procurement and sourcing > Common > Purchase Orders

Procedure: Post the Return

Returned Order Purchase Type

Scenario: Returned Order Purchase Type

Procedure: Create a Returned Order Purchase Type

1. Open Procurement and sourcing > Common >

Create Vendor Returns for Serialized Items

Scenario: Vendor Return for a Serialized Item

Procedure: Create a Returned Order for a Serialized Item

2. Click Inventory > Reservation to specify the serial numbers.

Scenario: Vendor Return with Items from Two Batches

Procedure: Create a Vendor Return from Two Batches

7. Click OK and the information from the original purchase order is

Procedure: Reserve Batch Numbers to be Returned

Lab 6.1 - Working with Vendor Returns

Need a Little Help?

• Create a purchase order header for vendor 1103, Fog Projectors.

1. Open Procurement and sourcing > Common > Purchase Orders

Lab 6.2 - Complete a Vendor Return Using Returned Order

The purchasing agent at Contoso Entertainment Systems has contacted vendor

Need a Little Help?

1. Open Procurement and sourcing > Common > Purchase Orders

8. Click the Item number arrow, and then select 1706.

The three ways to create a vendor return are as follows:

• Negative Quantity: A return action that is made when there is no

Test Your Knowledge

Test your knowledge with the following questions.

Quick Interaction: Lessons Learned

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