How to differentiate between subcontractors and vendors in Business Central?
In Business Central, a vendor sells you an item that you put in stock, while a subcontractor performs a job for you, such as an operation in a production routing. Both are handled through purchase orders, but subcontracting is more complex because it ties to the operation on the production order routing.
You set up a subcontractor on a work center by filling in the Subcontractor No. field on the Posting tab and selecting the relevant vendor. You then use the subcontracting worksheet to calculate the subcontracting jobs you need to do and to create purchase orders as subcontracting orders.
Vendor and subcontractor in Business Central are not the same thing
Most Business Central users know the term vendor. Fewer notice that the system also uses the term subcontractor, and it is worth being clear on the difference between the two.
A vendor is somebody who sells you an item. You buy that item on a purchase order of the type Item, store it in your inventory, and it adds to your item ledger entry. This is the standard purchasing flow most people are familiar with.
A subcontractor is a vendor that performs a job for you. Instead of buying a physical item, you buy an operation in a routing. A typical example is a painter who paints parts for you. You are not buying paint. You are buying the operation of painting, and you want to be able to control that work in your system.
How a subcontractor is set up on a work center
You configure a subcontractor on a work center. If you open a work center, for example a Paint department, and go to the Posting tab, you will find a Subcontractor No. field. When this field is filled in with a vendor, the work center is set up as a subcontractor. In this example, the painting company is selected as the vendor in that field.
Using the subcontracting worksheet
The subcontracting worksheet is the tool you use to manage subcontracting work. It calculates all the subcontracting jobs you need to carry out, and it lets you create purchase orders as subcontracting orders.
Why subcontracting is more complex than normal item purchasing
Subcontractors are handled through purchase orders in Business Central, just like items, but they are also tied to the operation on the production order routing. That link between the purchase order and the production order makes subcontracting a bit more complex than the standard item handling on purchase orders.
Q&A
What is the difference between a vendor and a subcontractor in Business Central?
A vendor sells you an item that you buy on a purchase order, store in inventory, and post to your item ledger entry. A subcontractor is a vendor that performs an operation in a routing for you, such as painting. With a subcontractor you buy the operation, not a physical item.
How do you set up a subcontractor in Business Central?
Open the relevant work center, go to the Posting tab, and fill in the Subcontractor No. field by selecting the vendor that performs the work. This marks the work center as a subcontractor.
What is the subcontracting worksheet used for?
The subcontracting worksheet calculates all the subcontracting jobs you need to do and lets you create purchase orders as subcontracting orders.
Are subcontractors handled with purchase orders?
Yes. Subcontractors are handled through purchase orders in Business Central, but they are also linked to the operation on the production order routing, which makes the handling more complex than a normal item purchase.
This is what happens in the video
If you’re going into a work center in Business Central, I’ll just take my Paint department here,
because I know in this scenario, it’s set up as a subcontractor, meaning it has a Subcontractor No. field in my posting tab, and you can select the vendor in this field.
So, this is set up as a subcontractor, the painting guy that we’re using, and you might also have seen a subcontracting work sheet that looks like this, and it’s used to calculate all the subcontracting jobs you need to do, and to carry out purchase orders as subcontracting orders.
So, what is actually the difference?
Basically, the difference is that a vendor is somebody who sells us an item, meaning we’re buying an item that we put in stock, and we buy it from a purchase order as the type item and store it in our inventory, and it adds to our item ledger entry.
Whereas a subcontractor is a vendor that is performing a job for us, so he’s doing an operation in a routing, for instance, like in my example before; a painter that is painting stuff for us.
So, we’re not buying paint, we’re buying the operation of painting, and we need to, or we like to be able to control that in our system.
So, subcontractors are also handled by purchase orders in Business Central, and on the operation on the production order routing.
So, it’s a little more complex than the normal item handling on purchase orders.
And we have other videos to explain how you can work with the subcontractors.