Argus ERP - Inventory Valuation Methods

Inventory valuation is very important for companies, as it is a major portion of assets and part of the balance sheet. So the company should valuate the inventory with most care and aware of the the valuation methods that suitable to their business environment.

When an inventory item is sold, the inventory account should be reduced (credited) and cost of goods sold should be increased (debited) for the amount paid for each inventory item. This works if a company is operating under the Specific Identification Method. That is, a company knows the cost of every individual item that is sold.

The inventory valuation method gives 2 important values 1) Cost of Good Sold (COGS) and 2) Ending Inventory. COGS shows on the Income Statement, while Ending Inventory shows on the Balance Sheet. Company inventory value can be determined as

Ending Inventory = Beginning Inventory + Purchases – COGS

There are three inventory-costing methods that are widely used by both public and private companies (Argus Inventory Software supports):

1.    First-In, First-Out (FIFO) - This method assumes that the units sold are oldest units on hand.

2.    Last-In, First-Out (LIFO) - This method assumes that the units sold are newest units on hand. 

3.    Average Cost - This method assumes that the weighted average of all units available for sale 

Importance of Inventory Valuation

When dealing with inventory items, we know the market shows different trends in trading of various products. The prices tend to increase or decrease, which means the choice of valuation method can dramatically affect ending inventory.

If prices are increasing, each of the valuations methods produces the following results:

• FIFO gives us a better indication of the value of ending inventory (on the balance sheet). It also increases net income because less cost old inventory is used to value the cost of goods sold. But should note that increase the amount of taxes that a company must pay.
• LIFO is not a good indicator of ending inventory value because the left over inventory might be extremely old and, perhaps, obsolete. This results in a valuation that is much lower than today's prices. LIFO results in lower net income because cost of goods sold is higher.
• Average cost produces results that fall somewhere between FIFO and LIFO.

If prices are decreasing then the complete opposite of the above is true.

For your company, you can review these valuation methods and decide one of them suitable to you. The chosen method must be applied consistently from year to year.

POS solutions and Accounting Software in Qatar

Are you looking POS (Point of Sales) with strong inventory and financial accounting modules in Qatar? I will try to give you some guide lines to select a good one for your business success in future.

Finding a POS for you is not simple, you can find several ready available POS software, but you are not sure whether which one is good one for you and whether can incorporate your own specified requirements. So how can you choose the best one? It should be based on lot factors, try to find the important questions you should ask your self to find the answers. In every POS you may be find lot of features, some of that one you required, some not required, and some you need to customise as per your requirements.

Why I am suggesting you to think well before selecting a POS, from our earlier experience with customers, most of them not happy with ready available POS, as they can’t customise as per change to the business requirements. It is possible to find a good one as per your requirements which is less expensive as well as increase the profits of your business. Become the leader in your business by choosing perfect software for your point of sales with inventory management and financial accounting integration.

Major 3 objectives of POS solutions are

1) Save time

2) Provide improved control over sales

3) Provide improved service to customers

However most of these solutions available in market, may involve high cost of ownership, complex setup, and rigorous training requirements. So you have to make sure whether your selection removes these barriers with an easy to use, customisable and affordable solution. 

Choosing the right Inventory Management Software

Why to have Inventory control software for you business?

Inventory control software systems have become inevitable in almost all of the business today. Inventory control software is a constitutional part of keeping the business moving fluently, whether it is an intense production unit or some service-oriented industry. The usage of software tools specifically designed for inventory control and management run deep into a company’s long way in keeping a company’s wheels running smoothly.

Inventory control software helps in inventory tracking and controlling the levels of stock, both real-time as well as batch stocks. The software usually has interfaces that can determine when stock needs to be reordered or needs to be scaled down because of less demand, which gives user the complete control over the inventory life cycle. This helps to keep the inventory always stocked up so that the user would never ever lose an order because of insufficient stock. The software can also spot potentially unwanted and old dying stock. It can track sales by drawing out intelligent trends and fact sheets over a period of time and report on orders that are expected to follow.

Argus Inventory Management solution in Qatar offers the most of the features, which is affordable to any small to medium business organizations.