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inFlow can help you to figure out the costs of your products and understand how profitable your business is.

There are two methods you can use to estimate your product costs:

Manual - You can manually set the cost per unit of your product

Moving Average Cost (MAC) - Let inFlow automatically calculate the moving average cost per unit of your products. This is only available for stockable products.

To select one of the above, choose from the Costing Method field from the product information screen.

Calculating MAC

The MAC is a costing method available for stockable products that gives you accurate costs on the inventory you have in stock. This is updated whenever you get new stock through a Purchase Order or Work Order.

Updating MAC through Purchase Orders

When you complete a Purchase Order, the MAC is updated by averaging the cost of the newly ordered products with those already in stock. For example, if you had 10 units of a product in stock with a MAC of $5, and you purchased 20 more units at $8, then your inventory would be updated to have 30 units at an MAC of $7.

You can use the non vendor costs field in the Purchase Order to keep track of extra costs that are part of the order, but not paid to the vendor. For example, credit card processing fees, customs fees, etc.

Note that the costs are updated when the Purchase Order is completed, not when the stock is received into inventory. In practice, this mostly occurs at the same time anyway.

There may be differences between the quantities and prices ordered, received and invoiced. The MAC uses the quantity received and the cost based on the invoice.

Freight and ancillary expenses are included in the MAC calculations, but tax is not. This is because many taxing schemes, especially the Value Added Tax (VAT) or Goods & Services Tax (GST) may later be refunded. If you do want to include the taxes into your costs, you can do this by setting the ancillary costs to include them. These extra costs are divided up into the products received in proportion with their base cost.

Cancelling a purchase order reverses the inventory movements, but does not reverse the cost updates, since you may have made other changes in the meantime. You may wish to manually update the MAC in this case.

Updating MAC through Work Orders

The MAC is also updated when products are produced as finished products in Work Orders. The cost of each product is assigned as follows. First, a base cost for each finished product is calculated by adding up the costs of all the raw materials that went into creating that finished product. Then, the costs in the Other Costs field are divided up into the finished products proportional to their base cost. The inventory and costs are both updated when the work order is completed.

Update MAC When Picking - The base cost for products is looked up for raw materials, then propagated up hierarchically to the finished products. Other Costs are allocated to the finished products proportional to their base costs. MAC for raw materials is removed at their current MAC.

Update MAC when putting away - The base cost for a product is looked up for raw materials, then propagated up hierarchically to the finished products. Other Costs are allocated to the finished products proportional to their base costs. MAC for finished products is updated based on these calculated costs.

Update MAC when cancelling - When cancelling pick transactions, put them back at the costs they were taken out at. When cancelling put-away, take them back out at the costs they were put in at.

Viewing the MAC log and adjusting the MAC

When inventory quantities are about to go negative or 0, the MAC will remain unchanged. When the quantity goes positive again, it is set to the MAC of the transaction that brought it positive.

You can view the full history of the MAC and make manual adjustments. To do this, open the product information, set the Costing Method to Moving Average and click the Edit / History link. A window will pop up showing you the history of adjustments to the costs.

To make a manual adjustment to the costs, you can type in a value into the New Unit Cost field and optionally specify the Reason for the adjustment.

Still unsure? Check out our tutorial video!