Current Average Cost
A Penny Saved Is a Penny Earned
A penny saved is a penny earned. No truer words have ever been spoken. While some people might think that the aforementioned approach is cheap, sometimes you profit margin is in how much you spend (your purchases), your cost.
Odoo is flexible enough to accommodate one of the following costing methods per category:
Standard Costing: providing ability to write the cost on the product level. This is a very inaccurate way to calculate product costs. Where inventory valuation & P&L report will directly read from this field in the case of this costing method.
FIFO/Real Costing: Real costing; almost self explanatory. Odoo will continuously update the cost of the product based on the incoming & outgoing moves. The cost is a composite of the product purchase price, the landed cost and any additional costs you decide to add. This is the most accurate method of costing the product where your reporting will always be useful & indicative of your current purchasing habits and inventory value. Business planning is made a lot easier when you know your costs & expenses.
Average Costing: Average costing calculates the average cost of the product as a whole from all the purchases & landed costs and any addition costs you incur onto the product. The cost variation after a long amount of time will be very minimal this is because in order to change the average cost you need to continually receive products that are more expensive than most of your other purchases of the same product. While relatively accurate & easier to manage, its no comparison to the Real Costing method from the aspect of accurate current estimation of inventory value. This does however give an accurate long term projection of the cost of the product. You can generally ensure that you product cost won’t fluctuate to much than the benchmark average cost. The minimal fluctuations also make sale prices more stable & competitive, makes selling & pricing a much easier strategy.
Current Average Cost module is similar tot he Average Costing method from Odoo. The costing formula that the CAC module incorporates is generally referred to as the ‘weighted average’. Meaning the average cost of the product quantities in stock.
Having this extra indication tool of the current average cost can allow you to make accurate promotional campaigns for the current on hand stock without losing. It adds a common costing method that Odoo doesn’t provide while allowing you to use another costing method on the category level.
You can simply use this customization by downloading the module and a new computed 'Current Average Cost' field will be added to the product template to calculate according to the 'weighted average'.
Reporting is the only way to get an accurate sense of where your business is at and tools that help you receive accurate reports in order to make correct business decisions (I.E BI; business intelligence tools) are crucial so Forecasting the cost of your product as well as getting current accurate readings of your stock can help you better plan sales strategies and marketing campaigns.