Netsuite Sessions for You
FIFO (First-In, First-Out):
Assumes that the oldest inventory (first-in) is sold first.
Cost of goods sold (COGS) is based on the cost of the oldest inventory items.
Suitable for businesses where inventory turnover is high or items are perishable (e.g., food or pharmaceuticals).
LIFO (Last-In, First-Out):
Assumes that the newest inventory (last-in) is sold first.
COGS is based on the cost of the most recently acquired inventory items.
Often used in industries where inventory costs are rising (e.g., manufacturing), though it is less common globally due to restrictions in certain accounting standards.
Average Cost:
Calculates the cost of inventory as the weighted average of all inventory costs.
Smooths out cost fluctuations over time.
Common for businesses with homogeneous products or large quantities of inventory.
Standard Cost:
Assigns a predetermined, fixed cost to inventory items.
Variances between standard cost and actual cost are tracked separately.
Commonly used in manufacturing businesses for cost control and budgeting.
Lot-Specific Costing:
Tracks costs at the lot level, suitable for batch production environments.
Useful for industries like pharmaceuticals and food processing where lot tracking is critical.
Serialized Costing:
Tracks costs at the serial number level, providing detailed cost insights for individual items.
Ideal for high-value or unique items like electronics or machinery.
Real-Time Updates:
Inventory valuation is automatically updated with every transaction, ensuring accurate records.
Multi-Location Support:
NetSuite tracks inventory costs separately for each location, making it ideal for businesses with multiple warehouses or stores.
Integration with Accounting:
Automatically integrates inventory valuation with financial reports, including the balance sheet and income statement.
Transaction-Level Tracking:
Tracks inventory costs for purchases, sales, adjustments, and transfers.
Customizable Reporting:
Generate reports to analyze inventory valuation, inventory turnover, and profitability.
Support for Multi-Currency:
For global businesses, NetSuite handles inventory valuation across multiple currencies.
Accurate Financial Reporting:
Ensures the balance sheet reflects the true value of inventory.
Cost Control:
Helps businesses monitor and optimize inventory costs.
Regulatory Compliance:
Supports compliance with accounting standards like GAAP or IFRS.
Improved Decision-Making:
Real-time valuation provides actionable insights for inventory management and purchasing strategies.
Simplified Auditing:
Transparent tracking of inventory movements and costs facilitates audits.
Choose a Costing Method:
Navigate to Setup > Accounting > Preferences > Accounting Preferences.
Select the preferred costing method (e.g., FIFO, LIFO, Average Cost).
Enable Features:
Enable advanced inventory features such as multi-location inventory or lot and serial tracking if needed.
Define Inventory Items:
Create inventory item records and assign the valuation method at the item level if required.
Track Transactions:
Ensure all inventory transactions are recorded accurately, including purchases, sales, and adjustments.
Generate Reports:
Use NetSuite’s reporting tools to review inventory valuation details and reconcile them with financial reports.
Cost Variances:
If actual costs differ significantly from expected costs, NetSuite allows you to track and adjust variances.
Multi-Location Complexities:
Use NetSuite's built-in multi-location inventory tracking to manage costs at each site.
Frequent Cost Updates:
For businesses with volatile inventory prices, consider using the Average Cost method for smoother valuation.