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Old 08-17-2002, 10:08 AM   #1 (permalink)
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In another place Ronnie asked about problems related to the Average Cost of Inventory Items in Helios and the Cost of Goods Sold numbers reflected on the Daily Sales Report.

Here is my response:

Ronnie - to put it simply the whole Average Cost issue in Helios is a f.....g joke.

Sorry for the strong words but I have gone over this so many times with Helios Development, including Tony that I have just given up.

AND it is unchanged in Helios V10.0.45 - MAYBE they can get it right better V10 is actually released - but how foolish of me, the PRIORITY at Helios is WAN - who cares if the Shift Report adds up right, if Reports have Headers on each page, if Commission Reports are accurate or if values such as Average cost are correct and usable by Helios Users.

So we know of two primary problems:

1. Average cost is not stored on the Transaction file so IF the value of Average cost was correct it would be improperly started in Sales Reports anyway. Still not changed in V10.0.45 BUT the Current Cost is now being used in Cost of Goods displayed on the Daily Sales Report rather than "Average".

2. If you sell a Qty greater than ONE on a Sales transaction only the cost of ONE is reported in the Cost of Goods number on the Daily Sales Report. Still not changed in V10.0.45

Now back to your newer point, here is what is happening in V9.4 and it is unchanged in V10.0.45 (except Helios is not using the Average cost number on the Daily Sales report anymore).

In the Inventory table of Helios there is a field called Total_Received and another field called Total_Cost. The value displayed as Average Cost and used as Cost of Goods in V9.4 is the division of Total_Cost by Total_Received. An almost OK approach to determine Average cost if all Inventory Adjustment transactions were handled properly BUT here is how they are actually handled.

For Average Cost to be accurate ALL Inventory adjustments need to impact the values used to calculated Average Cost.

There are 8 different Inventory Adjustment types in Helios, here is what Helios does with each:

(Note: the Total_Cost uses the Current Cost times the Qty on each transaction (correct))

1. Ordered - No impact - Correct

2. Received - Increase Total_Received, Increase Total_Cost - Correct

3. Transfer In - Increase Total_Received, Increase Total_Cost - Correct

4. Transfer Out - Decrease Total_Received, INCREASE Total_Cost - MAJOR ERROR

5. Audit In - No impact - ERROR

6. Audit Out - No impact - ERROR

7. Vendor Return - No impact - ERROR

8. Store Use - No impact - ERROR

EVERY one of the above Inventory Adjustment types (except of course Ordered) should impact average cost. Of course it is the reversed impact of a Transfer Out that creates major distortion in the Average Cost value.

As well, it is incorrect for Average cost to be calculated on an accumulation of all historical transactions. If for example historically you had received and adjusted say 100 units at a total cost of $1,000. your average cost would be $10. If your stock now stands at ZERO and you received 10 units at $9.00 cost what is your average cost of this item.

Accounting 101 - your CURRENT Average cost that should be used for your current inventory is $9.00 - very straight forward. The total cost of prior receiving would have already been related to the prior sales. Using the Helios method of reflecting Average cost (all other issues ignored), Helios will reflect an average cost of $9.91. While this value of $9.91 may be the true average HISTORICAL unit cost of all product received, it is NOT however the proper Average cost of your inventory at this time for calculating your Cost of Goods of current Sales.

The Total_Cost field on the Inventory table should be adjusted with each Inventory Adjustment AND each Sales Transaction thus maintaining an accurate Cost of your Inventory and when divided by Qty_OnHand would reflect the current Average cost.

So Ronnie - what do you do:

1. You can keep the Average cost on the system as close as possible to reality by ONLY using Inventory Adjustment methods 2-Received and 3-Transfer In. If you need a negative adjustment enter the value as a Minus Quantity.

2. Ignore the Cost of Goods value on the Daily Sales Report - it will be inaccurate 99% of the time

3. The Master Inventory report values your inventory at Retail and Cost (Current Cost).

You will need to manually calculated your Cost of Goods:

Value of Opening Inventory
Plus Receiving within timeframe
Less Value of Closing Inventory
Equals Cost of Goods Sold within timeframe

Hope this help (Helios and well as you Ronnie, should Helios choose to address this ever so simple issue to correct)
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