Manage costs
/visma-net-erp/help/inventory/manage-costs
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# Manage costs
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About default prices
/visma-net-erp/help/inventory/manage-costs/about-default-prices
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In Visma Net, default prices are the sales prices of stock and non-stock items expressed in the base currency.
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# About default prices
In Visma Net, default prices are the sales prices of stock and non-stock items expressed in the base currency.
In Visma Net, default prices are the sales prices of stock and non-stock items expressed in
the base currency.
Default prices may be used for the items whose prices do not vary
depending on the quantity purchased, season, special promotional periods, and other
factors.
## Assignment of default prices and updating
You can manually enter the default price of non-stock items, and if the Inventory module is enabled in your system, the default prices of stock items.
These are added in the **Default price** field on the **Price/cost information** tab of the [Non-stock items (IN202000)](/visma-net-erp/help/inventory/inventory-windows/non-stock-items-in202000/) window and the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window respectively.
The default prices for stock items and non-stock items are specified in the base currency and for the base units. You can update the default prices as often as needed.
### Bulk editing prices
If you need to enter the default prices for many or all the items or update the prices in bulk, you can create appropriate import scenarios.
### Inventory module not enabled
If the Inventory module is not enabled in your system, you can only specify default prices for non-stock items.
## Limitations of default prices
The following are the most important limitations related to default prices:
+ A default price has no start and expiration date and once specified, it is used for the item until a new default price has been entered.
+ The system does not keep the history of default prices. You cannot define the default prices as promotional prices that are in effect for a particular date range or as tiered prices.
+ When updating price lists, you can specify a method of calculating the updated prices (based on item markup per cents, percent of increase, or so forth), and the new prices will be calculated automatically. However, when updating the default prices you calculate the default prices externally (using any method you consider appropriate) and enter the resulting prices manually on per item basis or import them from a file by using an import scenario.
+ The default price of an item is used as a sales price on an invoice (and a sales order, if applicable) only if there are no other prices (base price, or customer-class price, or customer-specific price) entered for the item.
## Discounts
If the default price is used for an item on an invoice or sales order, the discounts defined in the system will apply to the default price too.
Related pages
Concepts
Windows
About item costs and valuation methods
/visma-net-erp/help/inventory/manage-costs/about-item-costs-and-valuation-methods
page
Visma Net allows you to track stock item costs over time in accordance with the valuation method assigned to each item.
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# About item costs and valuation methods
Visma Net allows you to track stock item costs over time in accordance with the valuation method assigned to each item.
Item costs are tracked for base units, as well as units in which items are stored at warehouses or moved between locations or warehouses.
## Determining unit costs
Depending on the valuation method you have selected for the stock item, the cost of its base unit is either:
+ computed by the system based on purchase receipts or
+ estimated outside the system and entered manually by the user.
For information about how costs are maintained for non-stock items, see [About non-stock item support](/visma-net-erp/help/inventory/manage-stock-and-non-stock-items/about-non-stock-item-support/). The system uses the item's valuation method to revalue its stock and to determine its unit cost for sales orders and inventory transactions.
## Valuation methods
The following valuation methods are available to choose from:
+ FIFO (first in, first out)
+ Specific
+ Average
+ Standard cost
These methods are discussed in detail in the sections below.
### Assigning valuation method
You assign valuation methods to stock items in the following ways:
+ By using the [Item classes (IN201000)](/visma-net-erp/help/inventory/inventory-windows/item-classes-in201000/) window, you can assign a valuation method to a class, which will be used for the items of the class.
+ By using the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window, you can assign a valuation method to a particular item, if you want to override the valuation method of its item class.
### Reassigning the valuation method
As long as the item is out of stock, you can reassign an item's valuation method in the following way:
+ from **FIFO** to **Average**,
+ from **Average** to **FIFO**, and
+ from **Standard cost** to **Average** and **FIFO**.
## FIFO valuation method
If the **FIFO** valuation method is assigned to a stock item, its unit costs are recorded in layers, each of which is identified by
+ the receipt date,
+ the quantity, and
+ the purchase price (unit cost).
### Cost layers
Each new receipt creates a new cost layer with specific unit cost. You can view the cost of the last layer in the **Last cost** read-only field on the **Price/cost information** tab of the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window.
> [!NOTE]
> By default, the item cost is zero until it has been automatically or manually assigned.
When a certain quantity of the stock item is issued, the cost for the item is assigned starting with the earliest available cost layer.
If the quantity to be issued is greater than the quantity in the earliest layer, the entire quantity from the earliest layer will be issued (with the associated unit cost) and the rest of the required quantity will be issued using the next earliest layer (with another unit cost).
### Example with the FIFO issue method
Let's say a stock item was purchased in the following way:
+ Cost layer 1: May 10, 5 units at €8 each
+ Cost layer 2: June 10, 5 units at €10 each
The total stock cost is (5 \* €8) + (5 \* €10) = €90.
Further imagine that for a sales order, 8 items are required.
All units from cost
layer 1, and three units from cost layer 2 will be used to complete the transaction,
with the extended cost equal to (5 \* €8) + (2 \* €10) = €60.
For the next sales
order, there will be no more items with the €8 unit cost.
### Cost separately option
For each location in a warehouse that has the **Cost separately** check box selected, separate cost layers will be created, based on purchase receipts made
to the particular location.
If certain quantities of the items should be issued
from the location, the extended cost will be computed based on those
location-specific cost layers.
## The specific valuation method
The Specific valuation method is used for items with lot or seral number tracking.
With this method, the unit cost for each item is defined by the
unit's purchase price.
The unit cost assigned to the item on its receipt will remain
the same until the item is issued, used as a component, or sold.
### Cost layers
With the **Specific** method, cost layers are based on the serial or lot numbers.
New receipts specifying the same serial or lot number will update the cost of the layer.
### Example with the specific issue method
Imagine that a stock item was purchased as follows:
+ May 19, 100 items starting with the serial number 11023423 at €2.00 each
+ May 21, 100 items starting with the serial number 11023523 at €2.10 each
+ May 19, 100 items starting with the serial number 11023623 at €1.90 each
+ May 19, 100 items starting with the serial number 11023723 at €2.20 each
The total stock cost is €820. When items with the serial numbers 11023666 and 11023444 are sold, the unit costs recorded to the COGS account are €1.90 and €2.00 respectively.
## The average valuation method
If the **Average** valuation method (also known as **average moving cost** ) is assigned to the stock item, the unit cost will be calculated as the average weighted cost of all items at the warehouses or the total costs of all quantities of the stock items at the warehouses divided by the total quantity.
This valuation method is used for items that do not require tracking by lot or serial numbers or by expiration dates.
### Cost layers
The average cost will be automatically updated every time a new receipt specifying a unit cost different from the current average cost is released.
Once this receipt has
been released, a batch of journal entries will be generated to adjust the costs of
all available items.
You can view the current average cost in the **Average cost** read-only field on the **Price/cost information** tab of the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window.
### Example with the average valuation method
Imagine that a stock item was purchased as follows:
+ Layer 1: 100 items at €2.00 each
+ Layer 2: 100 items at €2.10 each
+ Layer 3: 100 items at €1.90 each
+ Layer 4: 100 items at €2.20 each
The total stock cost is €820, and the average cost is €2.05.
If you sell 250 items, the unit cost is €2.05, and the extended cost recorded to the COGS account is €512.5 = €2.05 \* 250.
## The standard cost valuation method
Standard costs, which are estimated to include some of the indirect and direct costs allocated, for stock items are determined outside of Visma Net by cost experts.
For a stock item with the **Standard cost** valuation method assigned, the unit cost is entered directly by the user in the **Pending cost** field on the **Price/cost information** tab of the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window.
### Warehouse specific standard costs
For items with the standard cost valuation method, standard costs can be maintained for each warehouse separately if the **Override standard** check box, located on the **Price/cost information** tab of the [Item warehouse details (IN204500)](/visma-net-erp/help/inventory/inventory-windows/item-warehouse-details-in204500/) window, is selected for the item stocked at a particular warehouse.
The item cost doesn't change as new receipts are released.
### Example with the standard cost valuation method
A stock item with a standard cost defined at €2.50 was purchased in the following way:
+ Layer 1: 100 items at €2.00 each
+ Layer 2: 100 items at €1.90 each
+ Layer 3: 100 items at €2.30 each
+ Layer 4: 100 items at €2.60 each
The total stock cost is €1000. Any differences between the standard cost and the unit cost on receipts multiplied by the quantity on the receipt are recorded to the standard cost variance account: in this case, €50, €60, €30, and –€10 respectively. On sales orders, the unit cost will appear as €2.50.
### Updating standard costs
Generally, standard costs are revised at the end of the financial year based on the financial results of the year, although they can be updated as often as is needed.
If you want to update standard costs for a number of stock items, use the **Price/cost information** tab of the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) or the [Non-stock items (IN202000)](/visma-net-erp/help/inventory/inventory-windows/non-stock-items-in202000/) window.
New values for standard costs are entered as pending standard costs. The pending cost assigned to a stock item that uses the standard cost valuation method becomes effective starting on the **Pending date** specified on this tab.
### Update costs for multiple items
If you want to make similar changes to many or all stock items, use the [Update standard costs (IN502000)](/visma-net-erp/help/inventory/inventory-windows/update-standard-costs-in502000/) window to enter new values and compare current and pending costs side by side for all stock items. If you are satisfied with the changes, you can update the current standard costs with the pending standard costs for all items or only selected ones by using the **Process all** or **Process** action on the window toolbar.
### Historical data
The system doesn't keep a history of the standard costs for the stock items, displaying only the last cost and current cost values on the **Price/cost information** tab of the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window. The historical costs that were effective before the last cost are not stored in the database.
## Unit cost and manual cost on issues
For items with the **Standard cost** or **Average** valuation methods, on inventory issues, unit costs (costs with respect to the base unit) are specified in the **Unit cost** field in the [Issues (IN302000)](/visma-net-erp/help/inventory/inventory-windows/issues-in302000/) window.
If an item has the **FIFO** or **Specific** valuation method assigned, costs of its units may be different, and the **Unit cost** field on the window displays the unit cost for the first unit to be issued, in accordance with the stock item's issue method. You can invoke the **Allocations** dialog box to view particular items to be issued or to select them by lot or serial numbers. The **Manual amount** value in the [Issues (IN302000)](/visma-net-erp/help/inventory/inventory-windows/issues-in302000/) window will automatically appear as the sum of the unit costs of all listed items.
Related pages
Concepts
Tasks
Windows
About the cost of inventory
/visma-net-erp/help/inventory/manage-costs/about-the-cost-of-inventory
page
For effective inventory management, your company needs to know the value of the inventory at its warehouses.
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# About the cost of inventory
For effective inventory management, your company needs to know the value of the inventory at its warehouses.
For effective inventory management, your company needs to know the value of the
inventory at its warehouses.
Inventory accuracy depends in part on how well you
account for inventory.
There are two basic methods of accounting for inventory:
Perpetual
: By using a perpetual method, your company can estimate the total cost of its inventory at any moment, updating inventory quantities and inventory account balances by every transaction, purchase, or sale. Information is updated continually in real time with this approach, without the need to cease inventory operations for counting. Over time, the accuracy of inventory levels and total costs may deteriorate due to theft, spoilage, losses, and other factors.
Periodic
: By using a periodic method, your company estimates inventory levels by performing periodical (cycle) counting. Cycle counting provides the most accurate data but is expensive and disruptive to business.
With Visma Net, your company can use the advantages of both methods to the extent that fits your
business.
While having perpetual inventory, you can implement the cycle counting
strategy that will help you minimise the costs of performing stocktaking while improving the accuracy of inventory levels.
## Multiple valuation methods
For a perpetual inventory method, you use inventory valuation methods to estimate the
cost of inventory stored at each warehouse at any moment.
Valuation (cost flow)
methods define how unit costs are calculated for each stock item on receipts and
issues, thus allowing the system to maintain a correct, up-to-date inventory
balance.
With the Inventory workspace, you can choose from the following valuation methods:
+ Standard cost
+ Average
+ First-in-first-out (FIFO)
+ Specific
## Negative quantities
In the Inventory workspace, a negative quantity of stock item of a specific item class is
allowed at a location as long as the quantity on hand is positive.
Appropriate
warnings are issued on transactions that result in negative quantities.
The **Allow negative quantity** check box is located in the **General information** tab of
the [Item classes (IN201000)](/visma-net-erp/help/inventory/inventory-windows/item-classes-in201000/) windows.
Negative quantities on hand can result when an issue has been made before the receipt specifying arrival of the certain quantity of the stock item is released. In this case, for over-issued quantity, a new layer is created. The cost assigned to the layer is the most recent historical cost of the item. When the inventory is actually received (on receipt in question release), the system compares the cost on the over-issue layer with the cost on the receipt, and generates a cost adjustment for the difference multiplied by the quantity on the layer (the quantity of over-issued units).
> [!CAUTION]
> This option can be used for items with the standard cost, average cost, and FIFO valuation methods. You may not use this option for items with lot or serial numbers assigned.
## Inventory valuation and revaluation
You can review the cost of inventory on hand in the [Inventory valuation (IN61550S)](/visma-net-erp/help/inventory/inventory-reports/inventory-valuation-in61550s/) and [Historical inventory valuation (IN61700S)](/visma-net-erp/help/inventory/inventory-reports/historical-inventory-valuation-in61700s/) reports.
Generally, standard costs are revised
at the end of the financial year based on the year’s financial results, although
they can be updated more often.
### Editing and updating standard costs
The pending standard costs and their effective dates are entered manually for each stock item that uses this valuation method on the **Price/cost information** tab of the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window.
Pending standard costs are updated for multiple items by using the [Update standard costs (IN502000)](/visma-net-erp/help/inventory/inventory-windows/update-standard-costs-in502000/) window.
For items whose standard costs are being updated, revaluation of their cost is performed. The system generates a batch of transactions that increase or decrease the balance of the inventory accounts, depending on whether the pending costs are greater or less than the current costs and updates the standard cost revaluation accounts defined by the item’s posting class.
Related pages
Concepts
Windows
About inventory ranking methods
/visma-net-erp/help/inventory/manage-costs/about-inventory-ranking-methods
page
In inventory management, you can use ABC codes and movement classes to identify categories of stock that may require different management and controls.
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# About inventory ranking methods
In inventory management, you can use ABC codes and movement classes to identify categories of stock that may require different management and controls.
In inventory management, you can use ABC codes and movement classes to identify
categories of stock that may require different management and controls.
These
categorisation methods let you rank stock items by their cost and turnover,
respectively.
This information can be used to group items for planning stocktaking and for making strategic and tactical decisions.
## ABC codes
Data gathered on various types of businesses shows that the 80-20 rule applies to most of them: 80% of the effect is generated by 20% of the cause.
Similar logic generally applies to inventory:
+ A small number of items (which can be designated with the **A** code) typically accounts for the largest value of stock.
+ A slightly larger number of items ( **B** code items) accounts for a smaller yet significant stock value.
+ The remaining large number of items ( **C** code items) accounts for only a small part of stock value.
> [!NOTE]
> In Visma Net, the ABC-codes are specified in such way that the total of percentages for all codes should be equal to 100%.
### Stock value as count basis
Ranking items by stock values can be used as the basis for planning efficient physical inventories in which **A** items are counted more often than **B** items (which in turn are counted more often than **C** items).
This reduces the total number of stocktakings performed while maintaining more accurate inventory levels.
## Defining ABC codes
You define the ABC codes to be used for stock items by using the [ABC codes (IN208500)](/visma-net-erp/help/inventory/inventory-windows/abc-codes-in208500/) window.
For each code, you
specify the percentage threshold and the frequency of stocktaking per year.
## Assignment of ABC codes
Initially, you can manually assign ABC-codes to some items by using the **General information** tab of the [Stock items (IN202500)](/visma-net-erp/help/inventory/inventory-windows/stock-items-in202500/) window, and the
items will have the same code assigned in every warehouse until the code assignment
is updated for the first time.
You should only assign codes to items for which codes
will be fixed (that is, not updated over time) and skip initial assignment for other
items.
At the end of a financial period, you can use the [Update ABC code (IN506000)](/visma-net-erp/help/inventory/inventory-windows/update-abc-code-in506000/) window to mass-assign ABC-codes to items based on their stock-on-hand
values.
## Automated assignment process
For the selected warehouse and financial period, the system assigns pending ABC-codes as follows:
+ The system arranges stock items in decreasing order, based on their percentages of total stock.
+ For each item, a subtotal is calculated as the item's percentage plus the previous subtotal (the sum of percentages of previous items).
+ These subtotals are compared to the thresholds specified for codes as follows:
|IF|THEN|
|---|---|
|items have subtotals that are less than the threshold for the A code,|they are assigned the pending A code (including the item whose subtotal is equal to the A threshold if any).|
|items have subtotal percentages between the threshold for A and the sum of the thresholds for A and B codes,|they will be assigned to the pending B code.|
Assignment continues in this fashion, and the subtotals for the C-code items should be greater than the sum of **A**, **B** thresholds and less than the sum of the **A**, **B**, and **C** thresholds.
You can view the list of the stock items with their current and pending ABC codes, and update the ABC-code assignments for all displayed items.
## Costly inventory insights
The ABC analysis gives you an immediate view of items that are expensive to stock.
Via this analysis, you can learn where your money is locked up and reduce the stock of expensive items.
When planning stocktaking counts, you can perform stocktakings for items with each code at the appropriate frequency for that code.
Items with fixed codes are part of the assignment, but their codes do not change in accordance with the statistical data.
> [!NOTE]
> ABC code assignment should be performed only when a certain volume of statistical data is available. If the data is available for fewer items than a certain threshold number, no items will be assigned to the **A** code.
## Movement classes
As with ABC codes, movement classes group items based on key inventory data or in this case,
turnover.
For each movement class, defined using the [Movement classes (IN208600)](/visma-net-erp/help/inventory/inventory-windows/movement-classes-in208600/) window, you specify the frequency of stocktakings
per year and the threshold value of criteria based on turnover to assign stock items to this class.
The number of turnover periods per year for all warehouses is specified ( **Turnover periods per year** ) on the **General information** tab of the [Inventory preferences (IN101000)](/visma-net-erp/help/inventory/inventory-windows/inventory-preferences-in101000/) window.
## Assignment of movement classes
You can initially assign items to movement classes using the [Item warehouse details (IN204500)](/visma-net-erp/help/inventory/inventory-windows/item-warehouse-details-in204500/) window; these items will have the same class in every warehouse until movement class assignments are updated for the first time.
You might instead initially assign only items to the classes, for which class assignment will be fixed, and skip assignment for other items.
## Updating movement class
You can update movement class assignments for a particular warehouse and a chosen turnover
period using the[Update movement class (IN506100)](/visma-net-erp/help/inventory/inventory-windows/update-movement-class-in506100/) window.
The system assigns movement classes to items as follows:
+ The system arranges stock items in decreasing order, based on their turnover rate.
+ For each item, a subtotal is calculated as the item's turnover rate plus the previous subtotal (the sum of turnover rates of previous items).
+ These partial sums are compared to the specified threshold for a class.
+ All the items for which the accumulated values are less than the threshold for the first movement class, are assigned to this movement class.
+ The items with accumulated percentages between the threshold for the first and second movement class will be assigned to the second class. Assignment continues in this fashion.
## Basis for stocktaking frequency
When planning stocktaking, you can organise it by the frequencies specified for movement classes.
Thus, you can perform stocktakings for items with higher turnover rates more frequently.
Items of each movement class will be counted at the frequency you have specified for the movement class.
Related pages
Concepts
Tasks
Windows