Valuation and Cost Layers
Knowing how many you have is half the question. Valuation answers what they are worth and what an issue cost you.
Where to find it
Architect Panel → ERP - Operations:
- Stock Cost Layers — the FIFO layers and what each issue consumed
- Standard Costs — a costed view of a structure, for quoting and variance
FIFO layers
Receipts create cost layers — this many units at this cost, received on this date. Issues consume the oldest layer first and record what they actually consumed. An issue spanning two layers because the first was exhausted reflects both.
Why the issue stores its cost
Because it makes margin permanent.
An issue that recorded what it consumed at the time will report the same margin next year. An issue valued by looking up a cost at report time reports a different margin whenever the cost changes — so reported profit on a historical sale becomes a function of when you asked rather than a fact about what happened.
This is the same reasoning as storing three currency amounts on a ledger line and storing a bill rate on a time entry: a figure describing a past event should be captured when the event happens.
What this gives you
- A stock valuation that ties to the movement history rather than to a separate calculation.
- Cost of sales per document, and therefore margin per line, order and customer.
- The ability to explain a margin figure by pointing at the specific layers an issue consumed.
Opening costs
Opening movements need realistic costs, not zero. A zero-cost opening layer produces spectacular margins until it is exhausted, and those figures will have been reported before anybody notices. Take them from your previous system.
Adjustments
A stock adjustment changes quantity and therefore changes value. Decide the cost basis deliberately: writing stock off at zero and writing it back on at zero balances the quantity while quietly destroying the valuation.
Standard costs
Standard Costs holds a costed view of a structure, useful for quoting and for variance analysis against what production actually consumed.
It is a comparison baseline, not what the ledger posts — that comes from the layers. Confusing the two produces a valuation that agrees with nobody.
Worked example
A component is received at £4.10, then at £4.60. An order issues 150 against a first layer of 100, so the issue records £410 plus £230 — £640, not 150 × £4.60. The margin on that order is fixed at the moment of issue, and still reads the same after the next receipt arrives at £5.00.
Recommendations
- Never open with zero costs.
- Decide the adjustment cost basis before your first write-off.
- Keep standard costs and actual valuation clearly separate in reporting.
- Confirm the posting accounts before stock movements start hitting the ledger.