Realtrac and Federal R & D Tax Credit Save Manufacturers Hundreds of Thousands of Dollars!

Realtrac’s World Headquarters are based in Livonia, Michigan, and are part of the “MMS 2014 Top Shop”-awarded, Delta Research Corp. But the development team needs to know what software and features the marketplace needs… and this guidance comes from the Realtrac Steering Committee.

The Realtrac Steering Committee is made up of Customer Machinists, Customer Management teams, members of the ownership, and Realtrac sales and marketing teams. All of these committee members are influential in the process of deciding which features and functions should be included in the system. The Realtrac sales and marketing team is the driving force of the committee, as they are on the front line of customer requests and inquiries.

While Realtrac’s parent company, Delta Research, Corp., heads the steering committee, Realtrac enjoys a hands-on approach to acquiring information for best machine shop practices. One example: in preparing for the 2014 tax season, the Realtrac Steering Committee, along with one prime customer of Delta Research, decided to invest development resources to make it easier for Realtrac users to claim their fair share of the United States Federal Research and Development tax credit. The sales and marketing team confirmed they had requests from their customers for this feature. We knew that what was good for one user could benefit many Realtrac users.

In general, a development team will break a New Feature request like this into two broad categories: Input (what information we should allow the user to enter into the Realtrac Performance ERP system), and Output (what reports and forms the system needs to generate to achieve the desired result).

Input-wise, we already had mechanisms in place to capture costs. Shop floor employees log in and out of jobs on a daily basis, so we already knew exact labor costs, as well as when they happened. Within our database we know down to the penny how much was spent on labor over the course of a company’s fiscal year. Not all jobs run through a shop are eligible for the tax credit, but the Realtrac job tagging mechanism already provided the perfect way to flag a job. While the development team went to work, we simply asked the Realtrac user to begin adding the tag "RD14" to jobs they believed were eligible for the credit.

Output-wise, we determined that two new reports were necessary. We developed a report that broke down every employee’s labor hours and costs for R & D jobs over the course of the company’s fiscal year. The second report examined the buyout/material expenses related to the R & D jobs. These two reports—produced with a click of a button in the Realtrac Performance ERP software, along with a simple “org” chart and a breakdown of administrative costs—were all that the Realtrac users’ accountants needed to prepare the claim.

Every step of the way, the Realtrac development team was working hand-in-hand with the Realtrac Steering Committee, Delta Research, and a third-party tax and accounting consultant the Steering Committee brought in to help guide the development process.

The best moment of the whole process? One very satisfied Realtrac customer who filed their claim for hundreds of thousands in credits. Their 2014 tax return is complete, and their Realtrac system has already been capturing costs for their 2015 return. Completing the claim next year is going to require no extra work. They’ll just need to tag eligible jobs and run the report at the end of the year!

Admittedly, the second best moment of the process was when the tax consultant said the Realtrac Performance R&D reports were the most complete, simplest presentation of the required documentation and information they have received from any software product, ever.

To all of our existing customers — please continue talking with Realtrac and your sales reps about what's going on in your business. What challenges can we help you with? What information do you need to help drive your business, improve sales, or cut costs?

Keep an eye on our social media and website—the R&D Feature is being officially released in our September, 2015 update; plus, we will be releasing a training video showing how the feature works, and helping get our users ready to file their 2015 claims.

To all of our future customers — keep this narrative in mind when deciding on your future ERP system.  These formal conversations between the Realtrac Development team and the Steering Committee occur weekly and even daily, informally.

Realtrac is unique in that it’s guided on a daily basis by a machine shop. So, features that benefit the Delta Research shop are very likely to benefit your machine shop.

Give Realtrac a call. We can set you up with a complete machine shop ERP system, including a great new feature that will automate the process of applying for your Federal Research and Development tax credit—all in under a week!

Complex Jobs, Inventory, Costing, and Profitability in Realtrac 10

Introduction

This white paper will discuss inventory and costing, specifically within Complex Jobs, in the Realtrac ERP system. While there are many unique scenarios our customers will encounter, we will present a simple model to let the user consider their options and adopt a plan that works best for their business.

Our goal in this paper is to demonstrate how to accurately track the costs associated with all the jobs within a complex job, properly maintain the inventory for the parts and final assembly, and produce the reports we need to run our business.

Let’s Build a Wagon!

Let’s discuss a relatively simple example of a Complex Job in Realtrac. Our final product is a toy wagon, with our root job being the assembly and finish of the wagon (Job 14J1167). This root job will have 2x child jobs, one of which will be the production of the wagon wheels (Job 14J1165) and the other the production of the wagon body (14J1166).

In the screen capture below, I’ve created the three independent jobs and the complex job structure. Each of my jobs has a router, and I’ve captured the costs associated with my material and subcontracts on the bill page. (I’m not going to bother scheduling this job for discussion, hence the blank Start and Due dates.)

Figure 1. Active Job list showing my complex job, two Child Jobs, and our one Root assembly job.

The Child Jobs

In this next step, we are going to complete the work on the two child jobs.

Let’s look at the router of the Wagon Wheel job, 14J1165.

Figure 2. The Router for Job 14J1165 (Wagon Wheels) and the Shop Floor Status screen showing an employee currently logged in to OP 30

In Figure 2, note that OP 10 and OP 20 are closed. They were estimated to take 30 minutes each, and we have registered 30 minutes against these jobs.

OP 30 is still open, and when we pull open the Shop Floor Status screen, we see that our employee “Sam Lindhorst” is currently working on this operation.

This operation is important, since it is the operation that will transfer finished pieces to inventory. In the Realtrac 10 ERP system, there is always a special router line that, when a piece count is recorded, will trigger an automatic transfer of the goods to inventory. If the router has one or more router lines with the Code of Count, then the last Count operation will trigger the movement of the finished pieces to inventory. Absent a Count operation (and our router here only has Other and Run operations), then the transfer to inventory is triggered off in the final router operation. In this case, that is OP 30.

Our employee has logged off this operation, registering a piece count of 20 units.

Figure 3. Employee logs off OP 30.

In Figure 3 above, our employee is logging off Operation 30 for 14J1165. They are registering twenty pieces complete but are leaving the operation open—not checking the “Operation Completed” checkbox—since we have not completed our full run of forty pieces.

When the employee clicks or scans the Accept button, the Realtrac ERP system will automatically transfer twenty completed units to inventory. If we look for inventory from Job 14J1165, we will see twenty units in our Realtrac ERP inventory.

Figure 4. Twenty units in inventory after part of the work for OP 30 has been completed.

I am now going to complete both of my child jobs: 14J1165, producing 40x wheels, and 14J1166, producing 10x bodies. After completing the work sessions, my inventory will show the following:

Figure 5. Inventory in place for our Two Child Jobs

The Root (Assembly) Job

At this point, our inventory has all the goods we need to start our root job (14J1167), our assembly, and the finish of the wagon. But before we kick off 14J1167, let’s review the current status of the costs for my complex job (aka “Job Tree”—note the Tree nomenclature on this report).

Figure 6. Job Tree Profit Analysis report for 14J1167 and associated jobs

Our root assembly job, 14J1167, has incurred $18.90 in costs thus far. This money is from the Buyout for the job (in this case, the paint required to finish the wagon, once assembled). As we begin the process of assembling and finishing the wagon, we will also incur some labor and overhead costs. But, once complete, we expect to make a profit on the job as a whole. We will return to this report during production (for a long run job) as well as after production, to make sure we’re still going to make a profit.

Before we begin assembly, we need to get our finished wagon wheels and bodies out of our inventory and into our assembly job (14J1167).

Highlight the FCP in Inventory and click the “Move to Job” button along the bottom of the interface. This will bring up the following window:

Figure 7. Move inventory to Job interface

A critical decision to make here is what dollar value should be charged to the assembly job. In Figure 7 above I chose the Other Price, which is currently set to $0.00. I do this because I’ve already captured the costs for the wagon wheels in Job 14J1165 (see the costs columns in Figure 6 above).

Note: Realtrac has also intelligently captured and saved a Cost Each and Price Each value for this item, as it transfers the goods from the job to inventory. The Cost Each is based on the true cost per unit of the item at the time it was transferred to inventory. The Price Each value comes from the value set on the main Job screen for the job that originally produced the part. Since the child job 14J1165 ran at a deficit, we see our costs were higher than the price of the part itself. All three values: Cost Each, Price Each, and Other Price, can be changed within the Realtrac Inventory module.

By completing this action, I am removing the child goods from inventory, transferring them to the assembly job, and maintaining all the information about the costs associated with all the jobs in my complex assembly.

After moving the 10x wagon bodies and 40x wagon wheels to my assembly job—when we check the Material Usage tab for job—it is now clear to the end user that the child jobs have been completed, and that the material is ready for the assembly job.

Figure 8. Material usage for our Assembly Job 14J1167

Please note, since we transferred the parts from inventory at $0.00 costing, the Buyouts for my assembly job have not changed.

Figure 9. Costing for our job has not changed.

Here, our employee begins work on the assembly of the wagon, logging in and out of the various router operations for the job. Once again, as workers complete pieces on the “trigger” line (last Count operation or last line of the router) for our assembly job, the finished wagons will be transferred to inventory.

Finishing Assembly and Analysis

With all of our operations complete, we should have a clean inventory (only our 10x finished wagons)—and our Tree Profit report should be nice and tidy. Let’s see if that’s the case:

Figure 10. Final profit report, and our Inventory status

In the lower portion of Figure 10, we see the status of our inventory. We have no inventory from jobs 14J1165 and 14J1166. The final output from those jobs was consumed by our assembly job 14J1167. We’ve yet to invoice and ship our final product, so all 10x units of our finished wagon are sitting in inventory.

In the upper portion of Figure 10, we see that we did make a profit on this job. Job 14J1167 was not charged for the costs associated with the production of 14J1165 and 14J1166, since we already captured those costs in their own jobs. But overall, the building of the wagons netted us a profit, and we can go home and enjoy the day!

Many of the variables in this scenario will change depending on your needs. You may not want to set any prices for the child jobs. You may build complex jobs with many more levels to them. It’s possible to have complex jobs many levels deep, where another “child” job will consume the output, producing yet another part that is consumed by the final root job.

We hope this has provided a nice starting point as you consider using the Realtrac Complex Job module or expanding its use in your facility. Please reach out to your Account Manager for additional ideas on using the Complex Job module as well as ways Realtrac can help your business grow.