For many sites, FIFO costing is essential to the business to ensure their inventory costs remain accurate. The system works very well and allows the user to look at the individual batches (whether you use batch control or not) and identify its cost.
However, there is one drawback. If for any reason the stock goes negative, the system does not cope very well with it. Although this should not happen, it can do for a variety of reasons. The result is that you end up with a FIFO batch with a negative quantity balance. Normally FIFO movements net off the oldest balance, but where the balance is negative, the system does not work.
The consequence of this is that you can have either a negative stock balance or a cost imbalance, where the cost of the negative and positive stock quantities do not agree. For many sites this can have serious consequences on the stock valuation.
IMS have developed a utility that runs every night and resolves these anomalies and with a minor modification to AFI, they can automatically be posted to the GL. The utility does the following:
- Nets off the negative FIFO batches against positive batches and create a stock movement
with a zero quantity and the net value
• Runs the routine automatically every night
• IMS modify AFI to post the value to a designated account
• A report of cost discrepancies is produced
In our experience this resolves the issue with FIFO costing and allows a business to properly value stock.