Inventory & Job Data Maintenance

□	The Inventory Tracking and Job Costing Set Up procedures should have been completed.

•	Now there are a few other Maintenance items which should be reviewed and more importantly, understood.

•	These Maintenance items provide additional functionality that will be quite useful in performing certain Inventory Tracking and Job Costing System processes.

□	There are five special functions/capabilities that will make using the Inventory Tracking & Job Costing System easier, and more productive.

1.	Kits - Explains how to create User Defined Kits from existing Inventory items.

•	These User Defined Kits may then be used when creating Proposals and Sales Invoices, recording Purchases, identifying Inventory Usage within the Job Costing module, and Inventory used for a Service Request in the Service Tracking System.

2.	ADI Import - Explains how to selectively import the existing ADI Inventory list into the Sale-Purchase Items Form.

•	ADI is a wholesale inventory and materials provider to more than 80,000 installer contractors in North America - many of whom are Security System installers.

•	Accommodating these users, the complete ADI inventory list may be imported (in whole or in part) into the Sale-Purchase Items table as Inventory items.

Calculate Average Item Cost - When the Average Cost of Inventory option is implemented (see the Inventory Valuation Methods chapter for detailed information), for all items identified as an Inventory Item, the Price In (Average Cost) and (total in stock) Value displayed on the Sale-Purchase Item Form - must be (re-)calculated.

4.	Transfers - Explains how to Transfer Inventory from one Warehouse to another.

•	It is often necessary to pass equipment from one Warehouse, Technician, Truck, etc. to another and the Warehouse Transfer Form allows you to accurately track those movements.

5.	Edit Warehouse Inventory Levels - Explains how to (Re-)Set the rules for Reordering Inventory items, and to adjust these numbers based on the actual quantities found while taking a physical Inventory.

•	Allows you to adjust one or more of the Inventory Count(s) displayed in the Warehouse Inventory Form for an Inventory Item.

□	There are three Inventory Valuation Methods available (also see the "An Analysis of the various Inventory Tracking System Processes" section in the Tracking Inventory as Assets, Liabilities, Sales and Expenses chapter)

1.	Price In - The cost entered on the Sale-Purchase Items Form

2.	LIFO - Last In / First Out

3.	Average Inventory Cost calculated, as needed, using the Calculate Inventory Item Average procedure.

□	Price In - By default, the Value of each Inventory Item is the original Price In Value (Cost) assigned to that Inventory Item as it is entered in the Sale-Purchase Category Form.

•	Whenever an Inventory Item is Purchased or Sold, this original Price In Value is the Value that is used in the associated General Ledger System transaction.

•	If using this Price In Valuation Method, future Purchases - regardless of the Cost paid for an Inventory Item - does not change the Price In Value (Cost) which the Inventory Tracking System and the General Ledger System will use to Value that Inventory Item.

□	LIFO - From time to time, Inventory Items may be Purchased for more, or less, than the cost that was entered as the original Price In Value on the Sale-Purchase Item Form.

•	If using the Price In Valuation Method (explained above) these Purchases do not change the Price In Value (Cost) which the Inventory Tracking System and the General Ledger System uses to Value that Inventory Item.

•	The Inventory Item continues to be Valued in Inventory Related Reports and General Ledger System Financial Statements and Reports based on the Price In amount that was initially entered in the Sales-Purchase Items Form.

•	However, from an accounting standpoint, you may want to alter this default behavior by having that Price In Value re-set, based on the most recent Cost paid on an Invoice for the Re-Purchase of each Inventory Item.

•	This automatic Price In Value (Cost) re-set - based on the most recent price paid (Cost) - is referred to as Last In - First Out, or LIFO for short.

•	Check the LIFO box on the Inventory Options tab of the User Options Form to initiate this Inventory Valuation Method.

HelpFilesUserOptionsInventoryOptionsLIFO

Check LIFO (Last In First Out)

•	Thereafter, whenever an Inventory Item is Purchased or Sold, this continuously updated (LIFO) Value is the Value that is used in the associated General Ledger System transactions.

□	Average Cost of Inventory - Another approach to Inventory Valuation is to use the Average Inventory Cost for the Value that is used in the associated General Ledger System transactions, and in Inventory Related Reports and General Ledger System Financial Statements and Reports.

•	Using the default Price In or optional LIFO Inventory Valuation Method may create anomalies when comparing those General Ledger System and Inventory Valuations in Inventory Related Reports.

•	This valuation drift occurs over time as Costs are reset but the previous history and timing of those Cost resets is unclear.

•	A different approach in establishing and maintaining the Value of the Inventory is to continuously Average the Cost of Inventory so that all Price (Cost) changes are taken into consideration whenever the Value of an Inventory Item is reported.

•	By Averaging the Cost of each Inventory Item - by adjusting the Cost of each Inventory Item whenever it is Purchased - will eliminate this valuation drift.

•	Once implemented, the Inventory Cost Averaging Calculation records each Purchase of an Inventory Item, the specific Price (Cost) paid for that item, and the Quantity of each Inventory Item that was Purchased.

•	Inventory Cost Averaging Calculation - Inventory Item that is currently "in stock" is determined by adding the Quantity of new Inventory Purchases and subtracting the Quantity of new Inventory Sales.

•	An Average Inventory Cost table is internally maintained by the system for each Sale-Purchase Item that has been identified as an Inventory Item

▪	This table contains the following information:

a)	Quantity of each Inventory Item that was Purchased

b)	Unit Price Paid for each of those Inventory Items

c)	Total Price Paid for the Purchase of those Inventory Items

d)	Current Count (the Quantity On-Hand) of each Inventory Item

e)	Total Cost Paid for all of the Inventory Items that are currently On-Hand

f)	Average Cost of each Inventory Item that is On-Hand.

►	Note: The current Average Cost Value is displayed on the Sale-Purchase Item Form for each Inventory Item

•	This example of the Average Inventory Cost table shows how it is accessed and updated as Inventory is Purchased and Sold:

	Quantity	Unit Price	Total Price	Count	Total Cost	Avg. Cost
1st Purchase	1	$3.00	$3.00	1	$3.00	$3.00
2nd Purchase	2	$3.00	$6.00	3	$9.00	$3.00
3rd Purchase	3	$1.00	$3.00	6	$12.00	$2.00
1st Sale	-1			5	$10.00	$2.00
4th Purchase	1	$4.00	$4.00	6	$14.00	$2.33
2nd Sale	-1			5	$11.67	$2.33

Sample Average Cost Valuation Calculations

•	When an Invoice for the Purchase of an Inventory Item is entered, a corresponding entry is made in this Average Inventory Cost table with:

a)	The Quantity that was Purchased

b)	The Unit Price Paid

c)	The Total Price Paid

d)	A new Count is calculated by adding the Quantity that was just Purchased to the previous Count.

e)	The new Total Cost Paid is calculated by adding the Total Price Paid to the previous Total Cost

f)	The Average Cost is re-calculated by dividing the new Total Cost be the new Count

►	Note: This Average Cost Value is shown on the Sale-Purchase Item Form for each Inventory Item

•	When a Sale of an Inventory Item is entered, an entry is made in this Average Inventory Cost table with:

a)	The Quantity that was Sold

b)	A new Count is calculated by subtracting the Quantity Sold from the previous Count.

c)	The Total Cost Paid which is recalculated by subtracting the result of the Quantity Sold multiplied by the previously calculated Average Cost.

d)	The Average Cost is re-calculated by dividing the new Total Cost be the new Count

•	Implementing the Average Inventory Cost internally maintained calculation (Inventory Valuation methodology) for tracking the Value of Inventory Items within the General Ledger System.

►	Note: By default, the AverageCostInventory option in the Company Settings dialog - accessible from within the Company tab of the User Options Form - is set to False ("F").

1.	If the AverageCostInventory option set to True ("T"), Inventory Valuation will be set based on the Average Cost paid for an Inventory Item versus (whatever was) the previously selected Inventory Valuation method.

▪	When AverageCostInventory is set to True ("T"), setting the Inventory Valuation to the Average Cost paid for an Inventory Item, if LIFO (Last In/First Out) was the selected Inventory Valuation Method, it will be turned off (LIFO will be Un-Checked) automatically.

2.	Once the AverageCostInventory option set to True ("T"), from the Main Menu Select the Maintenance Menu and Choose the Inventory Tracking sub-menu, then Select the Calculate Inventory Item Average Cost option.

3.	On the Calculate Average Item Cost Form, Choose the Calculate Cost option to update both the Average Price In and the current Total Value of each Inventory Item defined in the Sales-Purchase Items Form.

□	Summary of the effects on the Sale-Purchase Item Form as they relate to these Inventory Valuation Methods:

•	The Price In for an Inventory Item - regardless of whether it is used as Both a Purchase and a Sale, or just a Purchase - will be the default Price inserted for the Inventory Item when entering a Bill.

HelpFilesBillFormInventoryDetailLineItemPrice

•	How and whether the Price In and/or Value fields will be displayed within the Inventory Info box on the Sale-Purchase Item Form is based on which Inventory Valuation Method has been elected. The differences in how these Price In and/or Value fields are displayed are as follows:

•	Price In - This will be displayed as a normal mandatory field on the Sale-Purchase Item Form if this is an Inventory Item and the Average Inventory Cost Inventory Valuation Method has not be elected.

▪	When the Price In Inventory Valuation Method is in effect, the contents of the Price In field will remain unchanged unless that field is modified manually.

HelpFilesPurchaseItemsInventoryInfoFields

Inventory Info box - LIFO or Price In Inventory Valuation Method selected

•	LIFO - If the LIFO Inventory Valuation Method is in effect, the contents of this Price In field will be updated each time another Inventory Item of this type is Purchased with the Cost re-set to the most current Price that was Paid.

•	Price In (Average Cost of this Item) - If the Average Inventory Cost Inventory Valuation Method is in effect, this is a system maintained field which is updated, as needed, using the Calculate Average Inventory procedure.

HelpFilesPurchaseItemsInventoryInfoAverageFields

Inventory Info box - Average Cost Inventory Valuation Method selected

•	Value (total value of what is actually 'in-stock' On Hand for this Inventory Item) - If the Average Inventory Cost Inventory Valuation Method is in effect, this will be a system maintained field which is also updated, as needed, using the Calculate Average Inventory process.