Stock and Valuation

Turning on stock tracking makes an item countable.

Choosing a valuation method decides what those units are worth when they leave. Both settings are easy to set and awkward to change, so this article is about getting them right first.

Stock tracking

A tracked item has a quantity per location, and every movement is a document: a purchase receive in, a shipment out, an adjustment or transfer in between. An untracked item has none of that, which is exactly right for a service and exactly wrong for a warehouse.

With tracking on	With tracking off
Quantity per location	No quantity at all
Appears in stock reports	Invisible to stock reports
Cost recognised when sold	Cost recognised when bought
Can be picked, packed and shipped	Billed without any stock document
Posts to a stock asset account	Posts straight to an expense account

Valuation methods

When you sell a unit, which unit did you sell? Nothing physical answers that, so the valuation method decides it, and it decides your cost of goods and therefore your margin.

There are two, and no others.

FIFOfirst in, first out: The oldest units leave first, so cost of goods follows your oldest purchase prices. The most common choice and usually the most intuitive.
Weighted Average Costblended, shown as WAC: Every unit is worth the average of what you have paid. Smooths out price movements and is simpler to explain.

Per-unit costing, where each individual unit carries the cost it was bought at, is not offered. For serialised high-value goods that means FIFO is the closest fit.

Setting opening stock

Count what you actually hold, per location
Per variant, since each variant holds its own stock.
Record a stock adjustment with reason Opening balance
Not a purchase receive, because you did not buy it today.
Enter the counted quantity and the unit cost
The cost is what your existing stock is genuinely worth, which sets your starting valuation.
Check the stock summary report
Against your count sheet, before anybody transacts.