For many companies, handling warranties is an important part of their business processes....
NetSuite Warranty Accounting Automation
A complete ERP warranty solution should automate any accounting entries as part of the solution. It is no fun to have to journal everything yourself or use Excel to track and manage warranty reserve liabilities. With our NetSuite warranty solution, all accounting is processed automatically for you.
On the warrantied item, a reserve percent field is used to estimate the reserve based on the sale amount. If the reserve is 3% and the sale amount is $5000 then the reserve to be accrued for the warranty reserve is $150. This amount gets automatically posted when the invoice is entered.
Administrators can set their own GL account mapping for warranty reserves in the warranty config record.
Upon filing warranty claims, this warranty liability account gets automatically adjusted based on warranty costs. The accounting team can review the warranty liability account and track reserves at the individual warranty level to see if warranties are being reserved correctly. In addition, the warranty team can perform root cause analysis by the failure reason to determine the most common cause for warranty claims:
In the above screenshot we can see a warranty reserve applied at 3% resulting in $150 of liability and 2 subsequent claims for motor component issues resulting in a reserve balance of $113.
While warranty reserves are meant only as estimates, tracking the balance helps to determine whether reserves are being estimated correctly. Tracking reserves and costs at the individual warranty level provides an extra layer of analysis and helps with root cause analysis for common warranty issues.