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Control Inventory Valuation
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Navigation: Basic Working Procedures > Inventory Management > Parts > Control Inventory Valuation |
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The manner in which you Control Inventory Valuation is significant for your Profit and Loss, since the Profit for Parts on a job is calculated by subtracting the Cost from the Sales Price. To understand Profit and Loss for a job, see:
The Sales Price side of the Profit and Loss equation can be affected by Inventory Valuation through only one channel, Parts Markups that have their Markup Type set to Cost. If the Markup is based on Cost, the Invoice detail Price will use the Cost depending on whether the Part was taken from Stock (Cost = Inventory Valuation) or linked to a Purchase Order for this Work Order (Cost = Actual Cost).
If the Parts Markup is based on Sale, then Cost coming from Inventory Valuation does not play a part in Sales Price. (For the more on the role of the Parts Markup in pricing, see Basic Pricing.)
Parts Cost for Inventory Stock is mostly determined automatically through the Purchasing, Inventory, and Invoicing process flow.
| • | In Cost on the PO Receipt for items in Stock the various possible Cost values in the Parts Record fields are automatically re-calculated every time a Vendor Bill for a Part arrives. |
| • | In Process Parts and any time Parts are added to the Items Tab on a Work Order by field or office personnel, Parts from Stock are relieved from Inventory at the Cost Valuation in effect for the Item detail line (Cost Valuation field on the Parts General Tab). |
| • | Invoicing the Customer finalizes the Cost for each Part billed. |
In order to provide more flexibility, FieldOne tracks and provides several different methods of Inventory Valuation for calculating Cost for a Part, which you can change and override as described below. (See the Part, General Tab. where these values are actually stored, for a full explanation of each Costing Method, with examples.) The methods are:
| • | Average Cost |
| • | Standard Cost |
| • | Current Cost |
| • | Highest Cost |
Different types of Parts may need different types of Inventory Valuation, depending on their expense, cost fluctuation and frequency of ordering.
For example, inexpensive, frequently ordered Parts with fairly stable prices might use either Average Cost or Standard Cost.
On the other hand, expensive, rarely ordered Parts with prices varying by available Vendor might use Current Cost or Highest Cost, to ensure profit in Sales Prices.
The Inventory Valuation of Cost applies to Work Orders only when a Part is taken from general Stock Inventory.
If Parts arrive on a Purchase Order directly associated with a Work Order the Cost that defaults to the Work Order detail line will be the Actual Cost you paid the Vendor for that specific Part.
There are only a few places where you can change how the Inventory Valuation for Parts is set.
| • | Company Preferences, Part Options Tab, where you can select the Inventory Cost Valuation system override. |
| • | Part, General Tab where the Inventory Valuation you select for any Part can override the Company Preference above with another choice. |
| • | Work Order Items Tab - for each Part on the Work Order Item Tab (and the Project Estimate Items Sub-Tab) you are allowed to override the default Cost by keying an entry. This can happen from the time the Work Order is created up through Posting, and might be done by different personnel. |