What is inventory valuation in tspoonlab and how does it work?
Inventory valuation is the method tspoonlab uses to price the quantities you count in an inventory and calculate the monetary value of a store's stock. Each store has its own method, which you choose in the store's "Inventory valuation" field.
tspoonlab offers three inventory valuation methods: "FIFO" (First-In, First-Out), "Weighted Average Cost (Purchases in the last 30 days)" and "Weighted Average Cost (Purchases in the store since the last inventory)". The method you choose sets the value of your inventories and of the store reports that use that value. The valuation method doesn't change your recipe costings.
This article shows you how to choose and change each store's inventory valuation method in tspoonlab. Worked examples explain how each method calculates the value of your stock. You'll also see what happens to your past inventories and recipe costings when you switch methods.
The article is aimed at people in charge of stores, purchasing or cost control who run inventories in tspoonlab. To change a store's inventory valuation, you need a user profile with permission to create and edit stores. The Store Manager and Inventory Coordinator profiles, for example, have this permission.
How do you change a store's inventory valuation method in tspoonlab?
You set each store's inventory valuation method in tspoonlab when you edit an existing store or create a new one.
Change the inventory valuation of an existing store
To change the inventory valuation of a store you already use in tspoonlab, edit the store from the stores module:
Go to "Management".
Select "Stores".
Find the store you want to change.
Click the three-dot menu next to that store.
Select "Edit store".
In the "Edit store" window, open the "Inventory valuation" drop-down.
Choose one of these three methods:
"FIFO"
"Weighted Average Cost (Purchases in the last 30 days)"
"Weighted Average Cost (Purchases in the store since the last inventory)"
Click "Ok". The window closes and tspoonlab saves the store with the method you chose.
To check the change, open "Edit store" again: the "Inventory valuation" field shows the new method. tspoonlab applies it from that store's next inventory.
Choose the inventory valuation when you create a new store
If you're creating a new store in tspoonlab, choose its inventory valuation in the same window you use to set it up:
Go to "Management".
Select "Stores".
Click the three-dot menu next to the search bar.
Select "Add store".
Enter the store name.
Choose the "Store type".
In the "Inventory valuation" field, select the method you want to use.
Click "Ok". The new store appears in your list of stores, and tspoonlab uses the method you chose to value its inventories.
For the full step-by-step guide to creating a store in tspoonlab, see Create and manage stores.
What inventory valuation methods does tspoonlab offer?
In each store's "Inventory valuation" field, tspoonlab offers three methods to calculate the value of the stock you count in your inventories:
"FIFO": values stock at the prices of the most recent purchases.
"Weighted Average Cost (Purchases in the last 30 days)": values stock at the average price of the purchases made in the last 30 days.
"Weighted Average Cost (Purchases in the store since the last inventory)": values stock at the average price of the last inventory and of the purchases that have come into the store since then.
How does the FIFO method work?
The "FIFO" method in tspoonlab assumes that the first ingredients to come into the store are the first to go out. That's why tspoonlab values the stock left in the store at the prices of the most recent purchases.
Worked example of inventory valuation with "FIFO":
On Monday you buy 1 loaf of bread for €1.00, and on Tuesday you buy another loaf for €1.20.
On Wednesday you sell 1 loaf. With "FIFO", tspoonlab assumes that the loaf that went out is the first one that came in: the €1.00 loaf.
tspoonlab values the loaf left in the store at €1.20, the price of the most recent purchase.
📌 Note: the "FIFO" valuation method only decides how tspoonlab values the stock in your inventories. It doesn't change which batch tspoonlab suggests in store movements, or the traceability of your ingredients: both depend on your account's traceability settings.
How does the weighted average cost of the last 30 days work?
The "Weighted Average Cost (Purchases in the last 30 days)" method uses each ingredient's purchases from the last 30 days. tspoonlab divides the total amount of those purchases by the quantity bought, which gives the average price. tspoonlab then values the quantity you count in the inventory at that average price. Because it's a weighted average, larger purchases carry more weight in the price than smaller ones.
Worked example of inventory valuation with "Weighted Average Cost (Purchases in the last 30 days)":
In the last 30 days you've bought 5 kg of salmon at €20.00/kg and 15 kg of salmon at €24.00/kg.
Purchase amount: (5 kg × €20.00/kg) + (15 kg × €24.00/kg) = €100.00 + €360.00 = €460.00, for a total of 20 kg bought.
Weighted average cost: €460.00 ÷ 20 kg = €23.00/kg. A simple average of the two prices would be €22.00/kg.
If you count 8 kg of salmon in the inventory, that stock is worth 8 kg × €23.00/kg = €184.00.
📢 Important: with the "Weighted Average Cost (Purchases in the last 30 days)" method, if an ingredient has no purchases in the last 30 days, tspoonlab values it at its price in the previous inventory. tspoonlab doesn't use the ingredient's current price.
How does the weighted average cost since the last inventory work?
With the "Weighted Average Cost (Purchases in the store since the last inventory)" method, tspoonlab doesn't look at the last 30 days. Instead, tspoonlab calculates the average price from the stock in the store's last inventory and the purchases that have come into that store since then. It doesn't matter how much time has passed between one inventory and the next. tspoonlab then values the quantity you count in the new inventory at that average price.
Worked example of inventory valuation with "Weighted Average Cost (Purchases in the store since the last inventory)":
In your last inventory, in July, you had 10 kg of an ingredient valued at €4.00/kg: 10 kg × €4.00/kg = €40.00.
In August, another 1 kg of that ingredient comes into the store, bought at €7.00/kg: 1 kg × €7.00/kg = €7.00.
Weighted average cost: (€40.00 + €7.00) ÷ (10 kg + 1 kg) = €47.00 ÷ 11 kg = €4.27/kg (€4.2727…/kg before rounding).
In the August inventory you count 2 kg, worth 2 kg × €4.2727…/kg = €8.55.
📢 Important: with the "Weighted Average Cost (Purchases in the store since the last inventory)" method, only a full inventory sets the starting point for the calculation. tspoonlab doesn't treat partial counts as the last inventory. Find out how a partial count differs from an inventory in Partial counts: what they are and how to do them.
Which inventory valuation method should you choose in tspoonlab?
The best inventory valuation method for each tspoonlab store depends on how often you buy its ingredients and how often you run an inventory. No method is better than the others. These guidelines help you choose:
"FIFO": values your stock at the most recent prices. Your inventory value is then close to what it would cost to buy that stock again today.
"Weighted Average Cost (Purchases in the last 30 days)": smooths out price rises and falls over the last month. It suits ingredients you buy often, for example every week.
"Weighted Average Cost (Purchases in the store since the last inventory)": takes into account everything that has come into the store between one inventory and the next, however long that period is. It suits stores whose ingredients you buy infrequently, such as a wine cellar, and it also works if you don't run an inventory every month.
Because you choose the valuation method per store, you can use a different method in each of your tspoonlab stores.
What happens to your past inventories if you change the valuation method?
Changing a store's inventory valuation method in tspoonlab only affects new inventories. Inventories you've already finished keep the valuation they were calculated with, and the new method applies from that store's next inventory.
💡 Tip: avoid changing a store's valuation method often. If you value each inventory with a different method, reports from different periods stop being comparable.
Does inventory valuation change your recipe costings?
No, a store's inventory valuation method doesn't change your recipe costings in tspoonlab. The price of the ingredients in your recipe costings stays the same, whichever valuation method you choose.
The cost of each ingredient in a recipe costing depends on the "Price calculation" set for that ingredient. Two of the options are "Last purchase price" and "Average price of last purchases". You'll find all 6 options explained in Price calculation for ingredients and materials.
📌 Note: the "Average price of last purchases" option in "Price calculation" and the "Weighted Average Cost (Purchases in the last 30 days)" valuation method both calculate a weighted average of the purchases from the last 30 days. They do different jobs, though. The ingredient option sets the ingredient's price in your recipe costings. The store method values the stock in your inventories. Changing the ingredient option doesn't change the store method, and vice versa.
Where can you see your inventory value in tspoonlab?
The monetary value that the inventory valuation method calculates appears in two places in tspoonlab:
When you finish an inventory: the real cost of the inventory shows the counted quantities valued with the store's method. You'll find the step-by-step guide in Manage your inventories.
In the stores report: the inventory valuation shows the monetary value of the stock at the end of the period you're analysing. The results block includes the opening and closing inventory and the real Food Cost %.
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