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You order the finished goods from the subcontractor using a Purchase Order with the Order for Processing transaction type. The subcontractor is specified as a service supplier. The required finished goods are listed on the Finished Goods tab, while the raw materials that belong to your entity and that are needed for processing are listed on the Inventory tab (this tab can be populated automatically based on the listed finished goods and their specifications). For details, refer to Purchase Orders (Order for Processing).
Prepayment
Prepayments (if requested by subcontractor) can be processed as usually, by generating a Bank Payment, Cash Payment, or Cheques Issued directly from the purchase order. Specify that the payment serves as prepayment by selecting the Advance option on the Payment Details tab.
Then, when the entity is billed for the subcontractor services, the prepayment can be applied to the Subcontractor Report or the Invoice Received.
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If the materials intended for processing are stocked at at your entity's warehouse for which the Separate Inventory and Financial Documents option is selected on the Administration > Settings > Purchasing and Warehouses form, you need to create a Goods Dispatch Note to register the goods issued from the warehouse. For more information, refer to Goods Dispatch Notes.
Receiving the finished goods, scrap, and returned raw materials
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To register the finished goods and scrap received from subcontractor processing to the warehouse for which the Separate Inventory and Financial Documents option is selected on the Administration > Settings > Purchasing and Warehouses form, you also need to create a Goods Receipt Note. For more information, refer to Goods Receipt Notes.
Invoice Received (Return from Subcontractor Processing)
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