Handling Core Charges and Returns
Core Charges Defined
The core is a used and non-functioning part that can be recycled and sold as a remanufactured part. Some of the recyclable parts that manufacturers consider core parts are water pumps, motors, circuit boards, certain air conditioning compressors, and more. The return of core parts to the manufacturers lowers the cost of the parts and related repairs.
A core charge is a customer deposit, usually limited in time where the customer can return the item and get a refund. Some cores have no value because of their condition.
In some cases, the technician collects the item at the time of the repair. In that case, the customer receives their credit at the time of the service call.
- You remove a water pump from a car and take it to an auto parts store for a replacement. They will sell you a water pump and charge you for the core. They will immediately credit you the same amount for the core since you brought it with you. The auto parts store sends the water pump to a company that will recondition it and they get paid for those cores.
- You go to the auto parts store for a water pump. They will sell you a water pump and charge you for the core. They will credit you back the same amount once you come back with the old water pump (the core). The auto parts store sends the water pump to a company that will recondition it and they get paid for those cores.
- You run a service call and replace a circuit board. That board has a value of $30.00 if it is returned to the manufacturer for reconditioning. You replace the board and optionally charge the customer for the core. You immediately give them credit for the core since you are onsite and will take the circuit board with you. The office collects the cores from each truck and sends them back for credit.
Total Office Manager Setup
- Create an “Other Charge” item called Core Charge. The Item Number might be “CoreCharge”. It is up to you whether you have an item for each specific to the part. This item will create income so you will need to select an existing income account such as “Parts and Materials” or “Other Income”. You may also create a new one specific to Core Charge income.
- Create an “Inventory Part”. The Item Number might be “CoreChargeReturn”. It is up to you whether you have an item for each specific to the part. This item will increase your inventory balance when you receive the “Core” from your customer and it will reduce inventory when you return it to the vendor. The following account selections may look odd but it is very important that this step be followed closely.
- In the Income selection, select the “Inventory” asset account.
- In the COGS selector, select the same asset account as above.
- In the Asset account selection, select a COGS account (ex: Parts and Materials).
- Items have a Copy feature located under the Item Menu button. You may use this to speed up the process of creating similar items.
- When the “CoreChargeReturn” item is added to an invoice with a negative quantity, it will increase your inventory balance. You will do this when you receive the “Core” from your customer. It will reduce inventory when you return it to the vendor.
- If you have items that will also include a potential core return, consider adding “(core return eligible)” to the end of the item description.
- If you are using a generic Core item description, always, enter a good description of the item you are returning in the item description field.
- If you are unable to locate the Chart of Account you are looking for when setting up your items, please be sure to turn off Smart Account Selection Filtering. See the image below.
Usage in Total Office Manager
- Create invoices and sell items as usual.
- When you wish to collect a core fee, add the “CoreCharge” item to your invoice. This will create income. It will not create a Cost of Goods Sold or affect your Inventory Balance. Add a proper description and price (if needed).
- If you are receiving a core, add the “CoreChargeReturn” item to the invoice. Use a negative quantity sold (enter -1). This will reduce your income and add this item to inventory. Add a proper description and price (if needed).
- Create a Vendor Credit using the “CoreChargeReturn” item. This will create a credit for that Vendor that can be applied to a vendor bill at a later time. This action will also relieve inventory for that item. Obviously, this item will need to be physically returned to the Vendor. This action may need to take place first. The paperwork the Vendor gives you will be used to enter the Vendor Credit.