How to set up costing and batch accounting

Trade automation expert at Torgsoft

Batch Tracking and Cost Calculation: How to Know Your Real Profit

Accurate cost calculation is the foundation of management and financial accounting for any trading business. Without understanding how much a product actually cost, including all additional expenses, it is impossible to calculate net profit, business profitability, or the feasibility of running promotions. Torgsoft offers flexible mechanisms for batch tracking and cost calculation that adapt to the needs of both a small store and a large retail chain.

What Is Cost in Torgsoft?

In the program, product cost is not always equal to the supplier’s "purchase price". It is a complex value formed from the supplier price and additional cost components. For example, if you ordered a batch of goods and paid for delivery, these transportation expenses can be allocated to the goods receipt document. As a result, the cost of each unit increases fairly, which makes it possible to calculate product profit accurately at the time of sale.

Cost Calculation Methods

Cost calculation methods The program offers several cost calculation algorithms (configured in the menu "Settings — Parameters — Accounting"):

Last purchase price. The simplest method, where the cost of the entire remaining stock is equated to the price from the latest goods receipt document. This method does not take historical price changes into account and may show a cost of "0" after an internal transfer if there were no direct receipts from the supplier at the receiving warehouse.
By supply batches (FIFO). Cost is calculated as the average purchase price of the remaining goods. During a sale, the program writes off cost according to the FIFO principle (First In, First Out). That is, goods from the oldest batch are sold first at that batch’s price, then from the next one.
By supply batches by accounting centers. Works correctly if there are no internal transfers between accounting centers. The cost of goods in outgoing documents will be calculated by accounting center without taking goods receipt documents from other accounting centers into account. In stock status, the cost will be displayed as the same (average) across the remaining stock of the entire retail chain.
By supply batches with internal transfers taken into account. This is the most accurate and recommended method for retail chains with several accounting centers. With this method, internal transfers become "carriers" of cost from one warehouse to another. Each store has its own objective cost of remaining stock, which makes it possible to calculate the profit of each location without errors.

Batch Tracking: What Is It Needed For?

Batch tracking allows you to separate the same product that was received at different times or from different suppliers. To activate it, you need to click the "Additional parameters" button in the "Product type" card and check the corresponding box in the "Batch tracking" field.

Please note, to use batch tracking for products, the product must have a filled-in article value.

What batch tracking provides:

The ability to generate a unique internal barcode for each new batch. This prevents mix-ups if prices for different batches differ significantly.
Detailed profitability analysis. In the "Analysis of product movement by supply batches" mode, you can track the fate of a specific purchase: how much was sold, how much was returned, and what revenue was received specifically from that batch.
The ability to link goods receipt documents to created "Supply batches" for global analytics of supplier performance efficiency.

Golden Rules of Cost Accounting

To keep the figures in reports always correct, it is important to follow two rules.

First, avoid selling products into negative stock.

Second, it is necessary to recalculate cost regularly. The most convenient way is to set up an automatic scheduled task for nighttime (for example, at 01:00), so the program recalculates cost automatically while nobody is working in the database.

Questions — Answers

Why does the cost of all goods disappear on the first day of the new month in the "Warehouse Status" form?

This is the standard logic of the Torgsoft program: each time a new reporting period is created (the first day of the new month comes), the cost value on the "Warehouse Status" form will be missing, since the calculation for this specific month has not yet been carried out. To display the cost correctly again, just click the "Calculate cost" button manually or simply wait for the nightly automatic recalculation, if it is configured in the "Settings" form - "Scheduled tasks" - on the "Cost calculation" tab.

Why does the cost of goods in the reports equal zero after moving the goods from the main warehouse to the store?

The most common reason for this situation is that the required cost calculation method, namely "By delivery batches taking into account internal transfers", was not selected in the program settings, but some other one was selected, in which case the program looks for a revenue document from the supplier specifically at this store, but it is not there, because the goods arrived through an internal transfer. To solve this problem and see the correct profit, you need to change the method to "By delivery batches taking into account internal transfers" in the accounting settings and run a full cost calculation.

How does selling goods "at a loss" affect my profit reports?

If the settings allow the sale of goods that are physically not on the balance (negative quantity), the program will not be able to find a revenue invoice to take the purchase price from it, so the cost of such a sale will be recorded as 0.00 UAH. This will result in the financial statements showing the sales amount as 100% profit, which is incorrect and distorts the real financial picture of the business, so we recommend that you prohibit negative sales or make timely postings.

When trying to recalculate the cost, the program freezes or gives the error "Arithmetic overflow error converting expression to data type int". What to do?

This error occurs when the user accidentally scans the product barcode in the "Quantity" field when creating a warehouse document (for example, receipt, inventory, or write-off), causing the program to try to calculate the cost for trillions of units of the product. To fix this, you need to find this problematic product, edit the invoice by specifying the correct quantity, and then run the service operation "Clear information about product movement and recalculate cost" on the "Settings" - "Parameters" form - on the "Service" tab.

If I want to change the purchase price for a product that has been in the warehouse for a long time, how do I do it correctly so that the cost price is updated?

If there has been no movement for this product after it was posted to the warehouse, then you need to find the specific incoming invoice under which this product was received and adjust the price in it (via the "Document — Purchase Price Adjustment" menu, or directly in the incoming invoice itself, opening it for editing). After that, it is necessary to recalculate the cost price. However, if there has already been some movement for the product after it was posted to the warehouse (for example, sales were made), then the only option to change the cost price for the remaining product from this delivery batch is to use the "Analysis" — "Analysis of remaining products" mode.

Програма обліку товару для інтернет-магазинів, крамниць, торгових точок, складів та виробництва

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