Moving average price in SAP Business One

Moving average price in SAP Business One: benefits, challenges and useful reports

Inventory valuation is one of the central tasks in warehouse management. It influences not only the inventory value, but also the material costs and therefore directly the profit calculation. With the "Moving Average Price" method, SAP Business One offers a dynamic and realistic solution, especially for companies that frequently have to deal with fluctuating stock levels. Purchase prices have to do. But what exactly is behind it and how can this process be optimised?

1. the basis: stock valuation using the moving average price

The "moving average price" method - also known as the permanent average cost or weighted average - enables the inventory valuation to be continuously adjusted. With each new transaction, such as the Goods Receiptthe price of the item is recalculated based on the current stock quantity and the new purchase price.

Example: If you have 10 units of an item in stock at 5 ? per item and buy another 10 units at 7 ? per item, the new average price is adjusted to 6 ? per item. This ensures that the stock is always valued at a current and realistic price.

2. moving average price: Automatic update with every stock movement

One of the greatest strengths of this method is the Automatic recalculation of the average price for each relevant warehouse transaction. Whether goods receipt, goods issue or production order ? SAP Business One ensures that the inventory costs always correspond to the current purchase prices. This dynamic adjustment gives you a precise overview of the actual material costs at all times.

goods receipts: With every goods receipt, the Average price is recalculated by adding the costs of the newly received items and those of the existing stock and dividing by the total number of units.

3. price changes for incoming goods: No more surprises

Fluctuating purchase prices are not uncommon, and this can make material valuation complicated. With the moving average price method, however, these price changes are immediately incorporated into the new average price of the item. This allows you to ensure that your inventory valuation corresponds to the actual purchase costs - without manual adjustments.

Particularly relevant here is the WE/RE settlement, where purchased parts are valued with the order value at the time of goods receipt and then adjusted in the course of invoice verification and settlement. To ensure that the moving average price is adjusted promptly in the event of any invoice variances, it is recommended that the WE/RE run daily to be carried out.

4. impact on stock value and cost of goods sold

The moving average price method not only influences the inventory value, but also the calculation of the cost of goods sold (COGS). When an item is sold, the valuation is based on the current average price. This ensures a more precise profit calculation and protects you from surprises in your accounting.

5. advantages: Flexibility and up-to-dateness

This method has some significant advantages, especially for medium-sized companies:

Realistic cost assessmentThe cost base adjusts dynamically to the current purchase prices.
Minimisation of fluctuationsLarge price fluctuations are smoothed out by averaging.
Real-time transparency: Thanks to constant updating, you always have a precise overview of your stock levels and costs.

6. challenges: Beware of inflationary markets

Despite the advantages, there are also challenges. In inflationary markets, the moving average price method may result in lower inventory values, as price increases are not immediately fully reflected in the costs. It is therefore important to have a precise understanding of price developments in order to be able to interpret the valuation correctly.

7. important reports for the moving average price

SAP Business One provides useful reports specifically designed to track the moving average price:

Stock audit reportYou can find this report under 'Stock management > Stock reports > Stock check report'. It is essential to track the current stock value and the average price of an item. This report provides detailed information and helps to better understand stock movements.
Stock value reportThis report shows the total value of the stock based on the moving average price. This means you always have a clear overview of the current value of your stock.

8. additional functions: Flexibility in revaluation

Sometimes it is necessary to adjust the moving average price manually. For this purpose, SAP Business One offers the Stock revaluation. It allows you to adjust prices manually if the automatic calculation does not provide the desired value.

With the Continuous stock assessment also ensures that the actual item costs are used for postings. Even if other values are displayed in the user interface, the booking is always made on the basis of the correct moving average costs.

9. tips for optimal use

Here are some practical tips for using the moving average price in SAP Business One:

Update reportsBefore carrying out goods movements, you should update the stock check report. This ensures that the 'last determined price' price list matches the current values.
Note booking previewFor goods movements, SAP Business One may not display any values in the 'Stock value' field. However, the actual posting value can be displayed in the Booking preview can be viewed here.
WIP billing: For products manufactured in-house, the inventory price is updated by the WIP-Run (Work in Progress) in order to always have correct values even for unfinished products.
User interface vs. booking valuesIt is important to note that the display in the user interfaces does not always correspond to the actual booking values. However, the bookings in the background are always made with the correct moving average prices.

Flexible, dynamic, but not without challenges

The moving average price in SAP Business One offers medium-sized companies a flexible and dynamic method for inventory valuation. By constantly adapting to current purchase prices, the valuation remains realistic and precise. The method can be optimally utilised with the help of the available reports and the option to revaluate stock. However, special attention should be paid in markets with sharply rising prices, as the average price does not immediately reflect the full price increase. However, with the right reports and a clear strategy, the method is a powerful tool that will take your inventory valuation to the next level.

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