ERP Go supports multiple stock valuation methods to accommodate different accounting standards, business models, and operational requirements. Each method determines how inventory costs are calculated and how Cost of Goods Sold (COGS) is posted.
The valuation method is configured at company level and is applied consistently across purchasing, sales, and inventory movements.
The Standard Cost valuation method is available in the Core plan. With the Premier plan onwards, this is extended to include the additional methods FIFO, LIFO and Moving Average.
Standard Cost
Description
Standard Cost uses a predefined, fixed cost for each item. All inventory transactions and COGS postings are based on this standard cost, regardless of the actual purchase price. See guide How to create a product for user settings.
Numeric example
Standard cost: €10 per unit
Purchase receipt: 100 units at €12
Inventory value: 100 × €10 = €1,000
Cost variance: €200 posted separately
When 10 units are sold:
COGS: 10 × €10 = €100
Typical use cases
• Cost control and variance analysis
• Stable cost structures
Key characteristics
• Predictable inventory valuation
• Purchase price differences posted as variances
• Suitable for budgeting and performance measurement
FIFO (First In, First Out)
Description
FIFO assumes that the oldest stock is sold or consumed first. COGS is calculated using the cost of the earliest received inventory.
Numeric example
Receipt 1: 100 units at €8
Receipt 2: 100 units at €12
When 120 units are sold:
COGS:
100 × €8 = €800
20 × €12 = €240
Total COGS: €1,040
Remaining inventory:
80 units at €12 = €960
Typical use cases
• IFRS‑compliant accounting
• Perishable or time‑sensitive goods
• Stock rotation‑focused businesses
Key characteristics
• Inventory reflects recent purchase prices
• COGS based on historical costs
• Common in wholesale and distribution
LIFO (Last In, First Out - US only)
Description
LIFO assumes that the most recently received stock is sold or consumed first. COGS is calculated using the latest purchase costs.
Numeric example
Receipt 1: 100 units at €8
Receipt 2: 100 units at €12
When 120 units are sold:
COGS:
100 × €12 = €1,200
20 × €8 = €160
Total COGS: €1,360
Remaining inventory:
80 units at €8 = €640
Typical use cases
• US GAAP reporting (where permitted)
• Inflationary environments
• Margin and tax optimization scenarios
Key characteristics
• Higher COGS during rising prices
• Lower reported profits in inflationary periods
• Not permitted under IFRS
Moving Average (Average Cost)
Description
Moving Average recalculates the weighted average inventory cost after each receipt. All outgoing transactions use the current average cost at the time of the transaction.
Numeric example
Receipt 1: 100 units at €8 → average cost = €8
Receipt 2: 100 units at €12
New average cost:
When 50 units are sold:
COGS: 50 × €10 = €500
Remaining inventory:
150 units at €10 = €1,500
Typical use cases
• High‑volume inventory movements
• Fluctuating purchase prices
• Simplified cost tracking
Key characteristics
• Smooths price fluctuations
• Easy to understand and maintain
• Widely used in retail and distribution
Notes on Valuation Consistency
Stock valuation methods are available from the Premier plan onwards.
The default valuation method is Standard cost and can be changed in: System Setup - Company details - Accounting
User needs permission: System Setup - Role - Workplace - Stock Level Costing
Once inventory transactions exist, changing the valuation method is still possible
All methods integrate fully with ERP Go’s financial posting and reporting.
The selected method impacts inventory value, COGS and sales order margins
Pricing values are stored at the product level
Default Purchase Price - This price is used as the default purchase price and can optionally be applied as the default cost when creating new stock levels through a manual stock transaction.
Average Cost: This represents the average cost of the product and is continuously updated based on inbound transactions across all valuation methods. When the Moving Average valuation method is used, this cost is applied as the sales item cost to calculate order margins.
Note: When using FIFO or LIFO, inventory costs are tracked per receipt layer. For these valuation methods, separate cost records are used to calculate COGS, rather than the average cost.
Latest Cost: This represents the latest cost of the product and is continuously updated based on inbound transactions across all valuation methods.