Overview of Subcontractor Process
Subcontracting process occurs when a company hires (subcontracts) another company or an individual to perform the tasks that typically cannot be done internally. For example, in the construction industry, a general contractor typically hires several subcontractors that perform specialized tasks, such as such as electrical, plumbing, insulation, for an agreed-upon fee.
Enabling the functionality
To enable this functionality, select the Issue Goods for Subcontractor Processing option on the Administration > Settings > Purchasing form form. The related documents and transaction types become available.
The documents involved in the subcontracting process in FirstBIT ERP, are listed in the sections below.
Ordering the services
Purchase Order (Order for Processing)
You need to create master records for the finished goods, that is, the items that would result from subcontractor processing or manufacturing. For each such item, you need to create a specification with a list of raw materials or components that are your entity's inventory items and are needed for the processing.
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 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.
Moving materials to subcontractor
Invoice (Transfer to Processing)
To register the supply of the required raw materials or components to subcontractor, create an Invoice with the Transfer to Processing transaction type. As the basis, you can use the Purchase Order with the Order for Processing transaction type. The subcontractor is specified as a customer company. The list of inventory is filled out from the order.
Goods Dispatch Note
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
The supplier of processing services (subcontractor) performs its services and delivers the ordered finished goods. The subcontractor informs you if a smaller quantity of the raw materials was actually used than planned in the Purchase Order, how much scrap resulted and if some of raw materials are being returns because of quality reclamations or other reasons. Based on the data received from the subcontractor, you can generate the following documents.
Subcontractor Report
To access the Subcontractor Reports list, go to Purchasing > Purchasing Documents > Subcontractor Reports.
Subcontractor Report is a document originally prepared by subcontractor. Generally, a report can be created using the original Purchase Order as the basis and editing the quantities of finished goods on the Finished Goods tab, and the resulting scrap on the Disposals tab. Scrap is registered if you need it at your warehouses.
Also, on the Expenses tab, you specify the service item an its amount. This amount then can be allocated to the costs of the finished goods which include the costs of the inventory items listed in specifications and the proportionally distributed costs of the inventory items that although were not listed in specifications, but actually were used in the processing.
If earlier the prepayment had been issued to the subcontractor, click the 
button at the bottom of the form to the right of the Prepayment field to be able apply the prepayment.
Goods Receipt Note
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)
Also, if the subcontractor returns some of the raw materials as excessive or having quality reclamations, these items must be registered by creating an Invoice Received with the Return from Subcontractor Processing transaction type.
Note. The total quantity of each inventory item from the purchase order should be equal to the sum of the item quantity in the Report and in the Invoice.
Goods Receipt Note
If the unused materials are transferred from the subcontractor back to the entity's warehouse for which the Separate Inventory and Financial Documents option is selected on the Administration > Settings > Purchasing and Warehouses form, then you also need to create a Goods Receipt Note for these items.
Tax Invoice Received
This document registers the input VAT for the tax amount due on the service amount to be paid to subcontractor.
It can be generated from the Subcontractor Report or created manually, and you will need to enter the reference number and date of the actual Tax Invoice received from the subcontractor.
Payment document
Once the entity is billed for the subcontractor services, you can generate a Bank Payment, Cash Payment, or Cheques Issued on the base of the Subcontractor Report.
Non-Current Asset Classes
You will be able to create and use classes of non-current assets if you select the Enable Non-Current Asset Classes option on the Administration > Settings > Asset Management form.
There is a number of predefined classes. You can create additional classes of non-current assets to group the assets by their processing attributes or their position in the financial reports.
The list of non-current asset classes
To add a new class, click the Create button. To edit the existing class, double-click it in the list.
Adding a Non-Current Asset Class
In the Description field, type a brief description of a new non-current asset class.
<Auto> in the Code field indicates that the system will assign a unique identifier to the new non-current asset class once you save it.
The Non-Current Asset Classes (create) form
Once the class is saved, you can assign specific non-current assets to this class.
Click Save to save a new class or Save and Close to save it and close the dialog box.