Inventory Costing

Determine inventory costs

Inventory Costing determines how Numera values inventory, calculates Cost of Goods Sold (COGS), and provides inventory values to Accounting and reporting.

Accurate inventory costing is essential for:

Inventory valuation
Profitability reporting
Cost of Goods Sold calculations
Financial reporting
Purchasing analysis
Margin analysis

Numera supports multiple inventory valuation methods to accommodate different business requirements and accounting policies.

Overview

Inventory costing affects:

Inventory balances
Cost of Goods Sold (COGS)
Gross profit calculations
Accounting entries
Inventory reports
Sales profitability reports

Inventory valuation determines the cost assigned to products when they are sold, consumed, or otherwise removed from inventory.

Inventory Valuation Methods

Configuration

The inventory valuation method is configured at tenant level through Client Settings.

Navigate to:

Client Settings → Business Configuration → Inventory Valuation Method

Supported valuation methods:

FIFO (First In, First Out)
Weighted Average

The selected method applies throughout the inventory management process.

FIFO (First In, First Out)

Overview

FIFO assumes that the oldest inventory is sold or consumed first.

Inventory leaves stock in the same order that it was received.

FIFO Valuation

Purchase

100 units at €10

Purchase

100 units at €12

Sale

50 units sold

COGS

50 × €10 = €500 (oldest cost first)

Example

Inventory Receipts:

Receipt	Quantity	Unit Cost
Receipt 1	100	€10
Receipt 2	100	€12

Inventory Sold: 50 units

Result:

COGS: €500

Remaining Inventory:

50 units at €10
100 units at €12

FIFO closely reflects the physical movement of inventory for many businesses and is commonly used for inventory valuation.

Weighted Average

Overview

Weighted Average calculates a single average cost for all inventory currently in stock.

Each new inventory receipt updates the average inventory cost.

Weighted Average Valuation

Receipt

100 units at €10

Receipt

100 units at €12

Average Cost

(100 × €10 + 100 × €12) ÷ 200 = €11

Example

Inventory Receipts:

Receipt	Quantity	Unit Cost
Receipt 1	100	€10
Receipt 2	100	€12

Calculation: (100 × €10 + 100 × €12) ÷ 200 = €11 average cost

Inventory Sold: 50 units → COGS: 50 × €11

Result:

COGS: €550

Benefits

Weighted Average:

Smooths price fluctuations
Simplifies inventory valuation
Reduces cost volatility
Is commonly used for high-volume inventory environments

Cost of Goods Sold (COGS)

Overview

Cost of Goods Sold represents the inventory cost associated with products sold to customers.

COGS is calculated automatically when:

Outbound Deliveries are confirmed
POS transactions are completed
Inventory is consumed through production or internal usage

COGS Calculation Flow

Inventory Receipt

Goods are received into stock

Inventory Cost

Cost is assigned to inventory

Sale

Products are sold or consumed

COGS Calculation

Inventory cost becomes COGS

Accounting

Entries posted to the ledger

Landed Cost Components

Inventory Cost Calculation

Inventory valuation may include costs beyond the supplier purchase price.

Examples include:

Purchase Cost
Shipping Costs
Customs Coefficients
Customs Duties
Brokerage Costs
Import Costs

Landed Cost Build-Up

Supplier Cost

Base purchase cost of goods

Shipping

Freight and transport charges

Tariffs & Duties

Customs duties and brokerage

Final Cost of Goods

Total landed inventory cost

Additional purchasing costs can become part of inventory valuation, resulting in more accurate Cost of Goods Sold calculations.

Inventory Management and Accounting

When Inventory Management Is Active

If the Inventory Management module is active:

Inventory values are maintained by the Inventory module
Inventory receipts establish inventory valuation
Inventory transactions determine COGS
Accounting receives inventory valuation data automatically

Inventory Valuation with Inventory Management

Outbound Delivery

Goods are shipped to the customer

Inventory Valuation

Inventory module values the goods

COGS Calculation

Cost of goods sold is determined

Accounting Entry

Journal entry is created

Accounting Impact

Inventory valuation affects:

Inventory Asset Accounts
Cost of Goods Sold Accounts
Gross Profit Calculations
Financial Statements

The Inventory module acts as the source of truth for inventory valuation when Inventory Management is enabled.

Standard Cost Valuation

When Inventory Management Is Not Active

If Inventory Management is not available and Accounting is active:

Inventory costing methods are not used
Inventory transactions are not maintained
Cost of Goods Sold is based on purchase prices

The system uses standard purchase prices for valuation purposes.

Standard Cost Valuation

Purchase Price

Standard purchase price is used

Invoice

Supplier invoice records the price

COGS

Based on purchase price

Accounting

Entries posted to the ledger

Example

Purchase Price: €100
Sales Price: €150
COGS: €100
Gross Profit: €50

Without Inventory Management, actual inventory movement and inventory valuation methods such as FIFO and Weighted Average are not available.

Choosing a Valuation Method

FIFO Is Often Preferred When

Inventory has significant price fluctuations
Inventory is physically consumed in order of receipt
Regulatory or accounting requirements favor FIFO

Weighted Average Is Often Preferred When

Inventory turnover is high
Inventory items are interchangeable
Simpler cost tracking is desired