Cost and margin

A margin that changes after the fact is not a margin, it is a rumour.

Weighted average, recalculated on every receipt

Receive 10 at 10.00 and then 10 at 20.00 and the average becomes 15.00. Sell five and the average stays 15.00 — a sale does not move the average, because if it did, your margin would change simply because you sold something.

Why not FIFO

FIFO needs batches, consumption against batches, and a queue per item per warehouse: several times the code, and impossible to explain to somebody without an accountant. Weighted average is accepted everywhere and converges to the same figure over time. If your business genuinely needs batch-level costing — pharmaceuticals, anything with expiry dates — we are honest that this is not that system yet.

Margin on a document

Each sale movement records the cost at the moment it happened. The margin on an invoice is that recorded cost against the net amount of the document.

So buying the same goods more expensively next month does not change the margin on last month's invoice. If it did, every historical margin figure would drift every time you restocked, and your reports would be unreproducible.

Stock value

The stock screen totals quantity times average cost per warehouse. This is the figure your accountant will ask for at year end, and it is the same figure that sits behind the margin numbers, rather than a second calculation that can disagree with the first.

Where it does not apply

Untracked items have no cost and produce no margin — a service has no stock to value. If you want margin on services, the answer is a time-costing feature we have not built, not a fake stock movement.

← All guides