Added periodic revaluations for inventory items

The latest version (24.7.7) introduces periodic revaluation for inventory items.

While we lose automatic inventory revaluations, we gain several benefits:

  • Flexibility: Switch between different inventory valuation methods (weighted average, FIFO, LIFO, etc.).
  • Enhanced Tracking: Use the Inventory Items tab to track quantities without showing them on the balance sheet. This is useful for businesses that don’t carry large inventories but still want to track quantities purchased and sold.
  • Advanced Production Orders: Create production orders that can output multiple items, not just one. Additionally, production orders will now work in both directions: raw materials can be converted into finished goods, and finished goods can be converted back into raw materials.

Also previously, negative inventory situations could prevent automatic calculation of the cost of goods sold, causing incomplete production orders due to insufficent quantity and broken inventory profit margin reports.

Periodic revaluations do not suffer from negative inventory issues that can be confusing and difficult to troubleshoot.

How to enable periodic revaluation for inventory items

To enable periodic revaluation, you need to disable automatic revaluations.

  1. Go to Settings.
  2. Select Obsolete Features.
  3. Find Inventory Automatic Revaluations and uncheck the Enabled option. Newly created businesses will have this option unchecked by default.

How to use periodic revaluations

By default, the average cost for all inventory items will be zero, which means the total cost will be zero and the Inventory on Hand account balance on the balance sheet will be zero. This is ideal for businesses with minimal inventory that don’t need to show its value on the balance sheet.

For businesses with larger inventories, you will want to display its value on the balance sheet. To do this, go to the Inventory Items tab and enable the Average Cost and Total Cost columns under Edit Columns.

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Average costs for inventory items can be entered under Settings tab, then Inventory Revaluations.

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Manually entering average costs can be time-consuming. Instead, use the new Inventory Revaluation Worksheet report under the Reports tab, which calculates average costs based on the FIFO method (more methods coming soon).

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Create a new report and specify the date for calculating average costs for your inventory items.

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When viewing the report, use the New Inventory Revaluation button to transfer the calculated average costs into a new inventory revaluation.

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6 Likes

Do we have to enter those multiple output items as negative bill of materials?

I didn’t implement ability to produce multiple output items but if you are using periodic revaluations for inventory items, you can enter negative quantity in bill of materials in the current version and it will have the desired effect.

Btw is this update optional or at some point we will be only left with this method?

Eventually periodic revaluations will be the only method. Automatic revaluations using perpetual weighted average are holding up quite a few topics in ideas category.

Automatic revaluations are only nice until something goes wrong. I’ve seen big and small businesses, both struggling with it when the figures seemed wrong and there was no easy way to troubleshoot them.

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The amount shown in the inventory value summary, should it be the same as the amount shown in the inventory revaluation worksheet on the same date.

I think Inventory value summary is not working properly as it is not considering sales, and it is also showing values based on automatic revaluation.

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This is great news, Thanks a lot

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@lubos is this feature implemented because It does not seem to work for me?

See 3rd post in this topic:

@lubos can you allow negative finish items using Automatic revaluation?
Also negative raw materials works fine (I think its like this from the beginning) but that additional qty doesn’t reflect on Inventory reports.
This can be done using periodic revaluation but we cant start using that until its fully matured as we have to make updates to previous production transactions and im afraid if it gets major changes again it will disturb all figures.

@Lubos made clear that:

I can understand how negative raw materials might be useful to account for byproducts – in fact many other software use this trick to account for byproducts.

However, I cannot understand this:

What’s your use case for this?

Finish items conversion into raw materials.
So i want the Finish item to Decrease in value and make the Raw materials increase in value. Which should be a simple credit debit transaction.
Possible through Journal entry but for that you have to calculate Avg costs manually which is a hectic process.

I just realised new production orders do not provide the option to add non inventory cost to the production order. What must me done to get this option

If using periodic revaluation, then non-inventory costs are not supported. I need to understand this better.

In the context of periodic revaluations, non-inventory costs won’t have a impact on your production order because inventory item will be costed based on its previously entered average cost.

The only time non-inventory costs could have impact on average price would be if Inventory Revaluation Worksheet would take non-inventory costs on production orders into the account when calculating new average costs.

But then again, non-inventory costs would require you assign them per finished item which I think is too much work. Not to mention, it will still not have immediate impact on financial statements. So I’m not sure how I feel about having non-inventory costs on production orders.

The non-inventory cost is used to absorb overheads to production cost regardless of what inventory valuation is used. Product cost includes inventory cost and other expenses. Taking this option off will have serious consequences because Manager will no longer be able to give use acurate product cost

@lubos, after following your instruction to activate the periodic revaluation for inventory items, all the production orders from inception have insufficient inventory and do do not show any production cost. Further, under the Inventory profit margin report, it seems the formula is broken too. Kindly, attend to this matter. Or am I missing something?