Advanced Inventory Valuation: Average Cost Method

This article will guide you through the process of setting up Fleetio with an Average Cost Inventory Valuation Method if you'd like to change from the default Static Pricing option in Fleetio.

Inventory Valuation Methods control how your Parts Inventory and pricing are managed in Fleetio when using parts in Work Orders.

Default Method

Static Pricing

With a Static Pricing inventory valuation method, the unit cost on each part is set manually and will not automatically change based on inventory adjustments or purchase orders. Part unit cost is the default price applied when the part is added to Work Orders. This is Fleetio's current part pricing method and will be the default on the inventory valuation screen.

Advanced Methods

Average Cost Method

With the Average Cost inventory valuation method, Fleetio will keep a dated inventory record for inventory at each Part Location. The price applied to Work Orders will be the average cost of each unit, calculated by dividing the total cost of all units in the Part Location by the total number of units in that Part Location.

First In First Out (FIFO) or Last In First Out (LIFO)

Fleetio also offers First In First Out (FIFO) or Last In First Out (LIFO) Inventory Valuation Methods. You can learn more about FIFO and LIFO in Switching to an Advanced Inventory Valuation Method: FIFO or LIFO.

Inventory Valuation Setup & Migration

To change your Inventory Valuation Method:

1. Navigate to your Account Menu and select Settings.

2. Under the Parts & Inventory section, click Inventory Valuation Method.
3. Select Average Cost

4. Before you proceed, it's important to review the information highlighted in yellow. This section contains important information about your past records after migration, requirements for switching to the Average Cost Method, and links to help you with meeting those requirements if necessary. For reference, this information is included below:

Important Information

• Any parts with inventory tracking disabled at a location and have ever been used on a Work Order cannot be enabled for tracking at that location after this migration.
• Any parts with inventory tracking enabled at a location and have ever been used on a Work order cannot be disabled for tracking at that location after this migration.
• Archived part quantities will be reset to 0
• For Part Line Items with negative or $0.00 unit costs on Work Orders before this migration: If the Parts are returned to inventory after migration, Fleetio will not recalculate your Average Cost using negative or $0.00 unit costs. Consider updating to a positive value.

Requirements

These requirements will be shown if parts in your inventory do not meet the requirements to migrate to the Average Cost Method.

• Unit Cost: All parts must have a unit cost of $0.01 or greater (limited to 2 decimal places). We will use the Unit Cost value stored on the primary Part record as the effective price for each individual unit of current inventory of that Part, across all Part Locations.
  • There are currently parts in your account that are enabled for inventory tracking but do not have a Unit Cost value and parts with negative or zero Unit Cost. You will need to edit these parts manually from the parts list or Download the CSV, add a Unit Cost, and run a Parts Import to provide a Unit Cost.
• Current Quantities: All parts with inventory tracking enabled must have a current quantity of 0 or more. There are currently 25 part(s) in your account with a current quantity requiring your attention before changing your valuation method. You can edit them manually or download this CSV and process an update via import.

5. Once all requirements have been met, check the box next to "I am aware the change I am about to make is permanent and cannot be reversed."

6. Click the Activate button.

After the migration is requested, you will see on the screen what time the migration will occur. There could be up to a 24-hour delay before the new Inventory Valuation Method is available in your Fleetio account.

Acquiring Inventory

When you acquire inventory through a Purchase Order, once the Purchase Order is set to Received, you will notice a change in the Avg Unit Cost of the Part. This is also true if inventory is adjusted manually. Let's review the example below:

Using Inventory

Adding Part Inventory to a Work Order

When you add parts to a Work Order, you will see the Unit Cost cannot be edited. When you choose a Part Location in a Work Order, Fleetio will automatically set the Unit Cost to the Current Average Cost for that Part at that location.

In some cases, the Average Cost may change while a Work Order is still open, and additional parts may need to be added.

In this scenario, Fleetio will retain the Average Cost for parts added before the change, and parts added after the change will reflect the new Average Cost. For example: