I want to update the accounting of my business in Zoho and make use of the new FIFO inventory valuation system
This is what I am thinking of doing:
Export the current database in order to have the same chart of account, taxes, payroll taxes etc.;
Delete all transactions;
Change the setting of all items so that the valuation method is based on FIFO;
Add manually in the new database the closing balances of 2024 from the old database. In the case of Inventory the starting balances for 2025 will be based on the weight average cost at the end of 2024;
Start registering the Sales and Purchase invoice related to 2025 with FIFO being the new valuation methos.
I cannot see any guide on FIFO and the problem I am facing is how to add landed cost components such as transport and import duties. With the weighed average cost, for transport and duties we would simply add a Purchase Invoice with no quantity indicated and the amount of transport or duties for the whole quantity of specific items (for example if we imported 10 pieces of an item and the cost of transport was 100 we would put 1000 as transport cost for that item and Manager would then spread it on the 10 pieces, the same with duties). However, it seems that this method does not work with FIFO and I can see that in the Purchase Invoice now there is an option for Freight in which can include different lines. However, it is not clear how this works. Also, it is not clear what happens when transport and duties have Purchase Invoices with different dates than the one of the goods, which has forex implications but also FIFO implications as the clearing might be done in installments.
Manager support Landed costs by using Freight-in in Purchase Invoices. But i think for FIFO (even WAC) they should be applied to a specific invoice not overall qty which we cant do right now.
Currently it is also not possible how Avgs Costs are calculated when using FIFO which @lubos mentioned that he will implement that to see from where these costs are coming.
It’s not clear if you are fixing your Zoho set up (another forum would be appropriate) or changing accounting program to Manager (here is the correct place to have the conversation).
I only know of this forum. Which other forums are there?
We used Manager until 2023, switched to another software in 2024, but now we want to try to move back to Manager due to the fact that FIFO has been introduced.
Confusing times. You will have to assess if Manager now meets your needs. Here is a reasonable forum to discuss moving to Manager.
Give your Accounting business history; the steps 1-5 in the OP look reasonable to me.
But first to test the details I recommend initially using a small test business and experimenting to try various approaches.
Thanks, yes I tried that. I tried to do a test and use the three components of our items cost (goods, transport, duties) the same way we used in Manager when it had only WAC, but the same approach does not work. With FIFO it seems that the only way to add landed cost from transport and duties is through the goods Purchase Invoice Freight-In field, which does not allow any flexibility in terms of dates, forex and especially item specific shares of costs.
But what I see in the item list is this though, it is only the cost of the goods:
I have also done a goods receipt dated 03-01-2025 as this might have an impact on when the costs are allocated to the landed cost?
I would expect to be able to click on Total cost and see the different transactions that add to the total cost in order to be able to check how the different landed cost components are added (and when), and the same for the Unit cost I guess. But I can only click on the Unit cost and this is what I see:
Ok I have clicked on Recalculate and it added all costs which is now €16.
Now, I have tried to add more Purchase Invoices for the same item so that the purchase dates overlap and the costs of transport and duties change, Therefore I have the following Purchase invoices chronologically 1 week away from each:
Week 1 - Goods purchased 1 - €10 x 100 pcs
Week 2 - Goods purchased 2 - €10 x 100 pcs
Week 3 - Transport for Goods 1 - €100 total
Week 4 - Transport for Goods 2 - €120 total
Week 5 - Duties for Goods 1 - €500 total
Week 6 - Duties for Goods 2 - €600 total
In this case I should have 100 pcs with a landed cost of €16 and 100 pcs with a landed cost of €17.2. and Manager should start selling first the ones at €16. But it seems that it is not possible to allocate landed cost from a Purchase Invoice (related to transport or duties) to a specific Purchase Invoice of the goods. Manager again does a sort of average calculation.
In fact, I have also created a Sales Invoice for 5 pcs. on a date between the last two Purchase Invoices (the two related to duties) and the COGS given by Manager is €68 which corresponds to a unit cost of €13,6. This unit cost comes from taking all the Purchase Invoices excluding the last one (as the Sales Invoices is issued on a date earlier than the last Purchase Invoice for duties) which means that Manager cannot give a real FIFO costing. It seems that it is missing a function of allocating landed costs such as transport and duties to a specific Purchase Invoice (hence to a specific batch of stock).
This all thing is also further complicated by the fact that Purchase Invoices for goods could come close to the end of the financial year while Purchase Invoices for transport and duties could come at a point in time in the new financial year, and this must be taken into consideration for valuation purposes. In fact, there are other types of accounting software that allocate these components of landed cost to specific goods Purchase Invoices but do so by using the same date of the goods Purchase Invoice, and this can distort the valuation of goods because a landed cost component such as transport should appear on the valuation report only on the date of its own Purchase Invoices.
In all this I wonder if Production orders could be a solution? So that I can “produce items” by adding costs at the point in time I need to specific stock batches. But I am not sure how Production Orders work, I have never used them.
Sorry I know this comes across messy, but it is the reality from our business model and the experience we have had with Manager and other software.
This is correct. However this feature request is already in separate topic in ideas and you will be able to associate landed costs with purchase of inventory items in another transaction.
You could use production orders as a workaround because production orders allow non-inventory costs but don’t do this workaround. I will be possible to allocate landed costs to specific purchases which will solve the issue.
@mauroskov this is not related to FIFO only. Being able to allocate landed costs to specific purchase invoice in the past would affect/improve calculation for all valuation methods.
Once issues with new inventory are ironed out then this aspect can be improved.
