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Change inventory cost method from standard to FIFO

  • 1.  Change inventory cost method from standard to FIFO

    GOLD CONTRIBUTOR
    Posted 25 days ago
    We want to change the current inventory costing method from standard to FIFO for some in stock items.  How can we accomplish this since there are transactions against these items?

    ------------------------------
    Deb Salyer
    DS Erp Inc
    Sarasota FL
    941-351-2990
    deb@dserpinc.com
    ------------------------------


  • 2.  RE: Change inventory cost method from standard to FIFO

    GOLD CONTRIBUTOR
    Posted 25 days ago

    Hi Deb,

    We did a change from standard to moving average last year.  Essentially what you need to do is:

    Stop users from entering transactions

    Clear open transactions:

    For purchase orders:  either invoice the PO or reverse the receipt and clear anything in registered status
    For sales orders:  Invoice the sales order or reverse the packing slip and clear anything that is in picked status
    For production orders:  move any production orders to End status

    Remove the items from inventory: We used count journals to bring the on-hand inventory to 0
    Change the item model group to FIFO
    Set the base price to your current standard cost
    Bring the inventory back in:  These will be "found" at the base price that you set.
    Re-receive the POs.  these will be received at whatever price is on the PO.

    Let users start making transactions.

    That is the process in a nutshell.



    ------------------------------
    Barclay Hershey
    Financial Analyst
    Sugar Creek Packing Co
    Cincinnati OH
    ------------------------------



  • 3.  RE: Change inventory cost method from standard to FIFO

    GOLD CONTRIBUTOR
    Posted 25 days ago
    All
    thanks for your response.  Unfortunately this is a multi global company and walking through all these steps would not be possible.  We will just need to inactivate those items and recreate with a new model group.  Wishing there was another choice.

    ------------------------------
    Deb Salyer
    DS Erp Inc
    Sarasota FL
    941-351-2990
    deb@dserpinc.com
    ------------------------------



  • 4.  RE: Change inventory cost method from standard to FIFO

    TOP CONTRIBUTOR
    Posted 25 days ago
    Agreed, completely!

    If I identify a more concrete process in the future, I will update this post for those who land here via google!

    ------------------------------
    Ian Gorman, PMP, MCSE
    MCA Connect
    Solution Architect
    ------------------------------



  • 5.  RE: Change inventory cost method from standard to FIFO

    GOLD CONTRIBUTOR
    Posted 19 days ago
    Hoping someone can help with this issue.
    step A -FIFO inventory on the model group with "include physical value' checked
    purchased 10 items @ 1000.00 each on day 1, purchase 10 items @ 1100.00 on day 2.  Sold 11 items on day 3 to customer.  365 took the total purchased and the total amount purchased and averaged the cost on the sales order as $11,550.00 ($21,000/20)* 11.

    Step B - with no physical cost checked - same scenario except now 365 calculated the cost as $11,000.00. (no idea where it got this total)
    The cost we want is this:
    Sold 11
    10 @ $1000.00
    1 @ 1100.00
    = $$11,100.00
    What are we missing that allows us to take the first received item at that cost then the next quantity from the next group with that cost?
    ​​​​​

    ------------------------------
    Deb Salyer
    DS Erp Inc
    Sarasota FL
    941-351-2990
    deb@dserpinc.com
    ------------------------------



  • 6.  RE: Change inventory cost method from standard to FIFO

    TOP CONTRIBUTOR
    Posted 18 days ago
    Deb,

    Did you turn off the include physical value flag on the same item model group that was assigned to your FIFO item when you were conducting part A?

    ------------------------------
    Ian Gorman, PMP, MCSE
    MCA Connect
    Solution Architect
    ------------------------------



  • 7.  RE: Change inventory cost method from standard to FIFO

    GOLD CONTRIBUTOR
    Posted 18 days ago
    I posted a new note that if you are using revenue recognition you cannot use any method other than standard.  When you run the month end recalc and close it revalues inventory and updates the ledger but does not update the RR on the sales order.  FIFO sits in average value until the month end close.
    Guess until MS address the RR issue we have to stick with standard which is truly not the correct cost because it is estimated.

    ------------------------------
    Deb Salyer
    DS Erp Inc
    Sarasota FL
    941-351-2990
    deb@dserpinc.com
    ------------------------------



  • 8.  RE: Change inventory cost method from standard to FIFO

    GOLD CONTRIBUTOR
    Posted 18 days ago
    Yes - tried both
    In my previous post the amounts that it calculates on the SO are off with the actual purchase amounts
    10@1000.00
    10@1100.00
    no physical checked
    SO sold 11 cost came out as $11,000
    using 10@1000.00 and 1 @1100.00  = $11,100​

    ------------------------------
    Deb Salyer
    DS Erp Inc
    Sarasota FL
    941-351-2990
    deb@dserpinc.com
    ------------------------------



  • 9.  RE: Change inventory cost method from standard to FIFO

    TOP CONTRIBUTOR
    Posted 25 days ago
    Edited by Ian Gorman 25 days ago
    Hi Deb!

    I am actually working on a project as we speak where we are removing WMS and changing the costing methodology from standard to weighted, so very close to your request! I would like to provide a fair warning that this solution may not be the most creative, but here is where I am currently at..

    The happy path would be to create all new items and start fresh. Depending on your data and how many years your organization has been on Dynamics, this may actually be the most time-efficient route to take. If not, proceed below!

    In order to change the item model group on existing items, you'll need to have ALL transactions for that item financially closed. Ensure you have the following done:

    • All production orders ended
    • All pending inventory transactions posted or deleted
    • All purchase orders that have been received for these items need to be fully invoiced
    • Any sales order where these items are on need to be fully invoiced
    • I recommend deleting any pending inventitemprice records too for these items

    Once you have finalized the transactions, you'll want to go to the Inventory management > Inquiry > Transactions grid and re-confirm all records show a date populated in the financial date field. If everything is dandy, count out the inventory via counting/movement/adjustment journal, run a recalculation/month-end close job, then go to the released products and change the item model group.

    Now, if you get this error message:

    'The item is set to be evaluated by inventory model "Standard cost". The system cannot convert the item to be evaluated by an inventory model of type "Transactions settled" only inventory models of type "Transactions not settled ...."

    You'll need to get with a developer to temporarily remove that logic check in order to proceed. Again, not the most advised route to take, but it'll get the job done. Creating new items entirely may be the route to go if you want to avoid all of the outlined items.

    Once you're on FIFO pricing, I'd recommend some of the following

    • Run a recalculation often, most of my clients opt-in to do this nightly
    • Review the production control parameters and enable the 'use estimated cost price' and 'price calculation' flags
    • Create a costing version for planned costs and create a pricing fallback for your FIFO items

    Let me know if this helps.

    ------------------------------
    Ian Gorman, PMP, MCSE
    Solution Architect
    ------------------------------



  • 10.  RE: Change inventory cost method from standard to FIFO

    TOP CONTRIBUTOR
    Posted 24 days ago
    Hi Deb -

    New to this thread. So what is driving the change to FIFO? With FIFO you'll need to start performing Inventory Close.

    Also, what release are you on?

    Thanks.....Dave

    ------------------------------
    Dave Phillips
    Sr Support Escalation Engineer
    Microsoft
    Fargo ND
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