Inventory on hand needs to be valued in some way. The method used to determine how inventory is valued is called the inventory valuation method.

In ABRA Flexi, the inventory valuation method can be set in company settings, specifically on the Modules tab and the Goods sub-tab.

Individual stock issues are then valued according to the configured method.

This is the most widely used inventory valuation method worldwide.

The average cost method values inventory at a price determined using the arithmetic mean. This is calculated from the individual acquisition prices of inventory items, i.e., the stock receipts for the relevant item.

The weight of the arithmetic mean is the quantity in each receipt. The average cost method can therefore be regarded as a weighted average.

In ABRA Flexi, the average price can be found on the stock card of the relevant item.

In the image above, 950 units of an item can be seen at a total value of CZK 95,000. The average price corresponds to the calculation 95,000 / 950, which equals CZK 100.

The principle of the FIFO method is to issue the relevant item at the price at which the oldest stored inventory was acquired.

The name comes from the English acronym "first in, first out" — meaning the first item to enter the warehouse is the first to leave it.

The FIFO method can be considered a more precise inventory valuation method. It uses the specific price at which an item was received. This is achieved through a so-called FIFO link, which is automatically created between a receipt line item and the corresponding issue line item.

The current price for issuing an item can always be determined within a specific stock issue document after the relevant item has been added.

The stock card only records the most recent price — the price at which the item was last acquired.

First and foremost, it is important to note that changing the valuation method is not a straightforward operation. If you are just getting started with Flexi and have no inventory or only minimal stock, switching the method in the company settings should not pose any issues.

However, if you have been managing your warehouse for some time and regularly work with stock receipts and issues, it is essential to create a new warehouse when changing the valuation method and re-enter your inventory into it (after switching the valuation method).

Existing stock must be issued out (e.g., using a bare stock issue document) and then received into the new warehouse after switching the valuation method (e.g., using a bare stock receipt document) at the correct price.