First, some definitions:
Product cost is what it will cost you to buy/add new inventory.
Wholesale price is what it cost to buy the items that are currently in your warehouse.
Warehouse price/value is wholesale price + shipping/additional charges, if you’ve entered it.
First-in, First Out (FIFO) is the idea that you are selling your oldest stock first. In this tutorial this relates to the cost of your stock, so if your older stock was more expensive than your newer stock, your warehouse value will go down as you sell your older stock.
Setting Product cost (optional):
Product cost is what it will cost you to buy new inventory. To set it, type the product cost into the product card, under the ‘Product Info’ tab. Click save in the upper right hand corner of the tab. This can be reset whenever you need it to be, and can also be uploaded/updated with your inventory import.
Product cost will not affect warehouse/wholesale value until stock is added to ERPLY.
It must be set to use your restock/reorder price, and its the price ERPLY uses to calculate warehouse price, if none is entered elsewhere, or if you’re using physical stocktaking, or updating the stock on the product card. Adjusting stock from the product card without a product cost will prompt the warning below.
Do not set a product cost if the item is highly variable in cost, you will want to indicate its cost on product registration or purchase order instead to get the most accurate results.
If product cost is not set on the product card, ERPLY will use instead the last accepted price on the purchase invoice, or inventory registration. This is the advised way to track product cost.
Wholesale Price is the cost of all of your products in the warehouse, based on product cost at the time of its purchase.
In ERPLY, the wholesale price and warehouse prices are calculated values. Specifically it is a weighted average determined by how much stock was purchased, how much was sold, and what each item of that type cost.
We use the First in First out (FIFO) principle to calculate this, so if your product cost changes between resupply, we sell the oldest stock first, then take that value out of our calculations to indicate the most correct value of your inventory.
That sounds complicated, but it’s not. Here is how it works:
I’ve run out of apples to sell, so I have no stock, no wholesale price, no product cost.
Then, I buy 10 apples for 1 dollar.
My price, at this time, is $1.00; this is ‘product cost’ on your inventory card. If your product has a highly variable price, or you are not using the ‘reorder’ or ‘restock’ points, you do not need to fill this field out on the product card, or you should update it any time you will be changing stock levels. If this is a constant price, you should input it into the product card, then when you update your stock through the product card, the price will pull from there.
Going back to the product card you can see that ‘Wholesale price’ and ‘Warehouse price’ have set themselves.
Next, I sell 9 apples, and I see my stock decrease.
Since I’m low on stock, I order more apples, only now, they cost me $1.75 instead of $1:
Now I can see that my wholesale price has updated. Its now 1.68, which is (1 apple @ 1 dollar ) + (10 apples @ 1.75) divided by my total of 11 apples (1+(9*1.75))/11= 1.681, rounded to 1.68.
The next apple I sell will bring that up to $1.75, as we will have sold the last apple I bought for $1.00.
Warehouse price is (wholesale price + shipping/additional costs)/ units, if you’ve entered your additional costs on your purchase invoice/order.
Price, on the purchase invoice/order, is product cost, which in this example is also wholesale price.
You’ll notice that the system will also give you your sales margin based on your product cost and additional cost, so you can tell if this is a good buy for you, or if you’ll need to adjust your price to your customers.
Once this invoice is saved and confirmed, the product is moved into your stock. You can see now that wholesale price has been adjusted based on your product cost, and warehouse price has been adjusted based on your product cost and additional charges.