Transaction-Based Stock Handling

This help article provides guidance on how to implement FIFO calculation and how transaction-based stock handling works. The article covers changes in stock valuation methods, precise stock tracking, and management of linkages.

CONTENTS

• FIFO calculation activation
  • Important considerations in FIFO calculation activation - IMPORTANT Tracking/Tracing/Linking
  • General principles in transaction-based (FIFO/LIFO) stock handling
  • User considerations and required actions during activation
• Changes compared to regular stock handling - IMPORTANT
  • Automatic linkages (FIFO principle)
  • Changes brought by linkage handling to the stock transaction view 
  • Exceptional linkage handling
  • Manual linkages (by the user)
• Terminology of transaction-based stock management (FIFO)
• Batch-based stock reports
• Stock transfer handling in product batch tracking
• Frequently asked questions

Transaction-based stock handling means that stock transactions can be automatically allocated to the correct product batch in the background.

FIFO calculation activation

FIFO calculation can be activated through Products > Stock settings > Stock valuation method (1). In this example, the previous stock valuation method is Running average price calculation.

1. Open Products > Stock settings > Stock valuation method.
2. Go to the stock valuation method edit view by clicking the link in the view (see image below).

Select the new valuation method FIFO calculation (2):

3. Select FIFO calculation from the valuation method list.
4. Save the change.

Important considerations in FIFO calculation activation - IMPORTANT
Tracking/Tracing/Linking

Transaction-based stock management provides tools for precise stock tracking at the product batch level. Tracking at the product level is not included in transaction-based stock management. The automation creates stock transaction rows from sales order and invoice rows and links them according to the company's chosen stock valuation method, FIFO/LIFO principle, to purchase or manufacturing batches to which reducing stock transactions are allocated. The user can manually edit the assumptions made by the automation and allocate transactions themselves.

With the transaction-based method, it is possible to track the movement of products and determine to which specific product purchase batch they have been transferred and/or delivered. There is a separate Stock transaction linking and releasing help for the linkage tool and tracing chain.

Important considerations in transaction-based stock management activation and changes to average price method stock handling:

General principles in transaction-based (FIFO/LIFO) stock handling

In Netvisor, stock is valued transaction-based according to the unit price used in stock transactions. The unit price is always fetched for stock-reducing transactions from the unit price of product batches in stock at the time of the transaction, either from the oldest (FIFO) or newest (LIFO) product batch. A linkage is automatically created between these, which the user can change, for example, by allocating sales to a product batch other than the one in reduction order according to the chosen valuation method.

In transaction-based handling, the user can create linkages deviating from FIFO or LIFO and build precisely desired tracing chains for product batches. With these, it is possible to report the movements of product batches from vendors through stock to customers. Since stock can be reduced to negative in Netvisor, it is also possible to make linkages retrospectively after stock replenishments. These linkages must be made manually by the user through the Unlinked to product batches report.

User considerations and required actions during activation

After connecting transaction-based stock valuation, existing stock transactions are automatically converted, where reducing transactions are retrospectively linked to product batches according to the chosen valuation method, either to the oldest (FIFO) or newest (LIFO) first. Not all transactions can likely be automatically converted and linked.

Unlinked to product batches report in batch-based stock management reports offers the user the opportunity to review these unlinked stock transactions, make necessary corrections, and link them manually.

After activation, perform the following checks and actions:

1. Open the Unlinked to product batches report from batch-based stock management reports.
2. Check the unlinked stock transactions shown on the report.
3. Correct, if necessary, stock settings, product names, or other data that prevent linkages from being formed.
4. Link the corrected transactions manually to product batches.
5. Use the mass function on the report, which checks the stock situation after corrections and attempts to make linkages retrospectively for all unlinked rows.

Most common reasons for unlinked stock rows:

• The stock balance has been negative according to the system in the initial situation, and no product batch was found in stock. In this case, either an inventory or other stock replenishing entry must be made, and transactions must be linked manually.
• A wrong product name may have accidentally ended up on the order or invoice in sales, for example between similar product models. It is worth being careful in sales handling because such errors can be difficult to identify and correct afterwards.
• Reducing stock transactions have a different stock than the product batches in stock. In this case, the stock designation of reducing transactions must be changed to match the product batches in stock, or alternatively, the stock of product batches must be updated to match the sales stock so that sales can be allocated to product batches.
• Stock transactions that only have reducing entries. In this case, the product name has been used, for example, for running bookkeeping and is not intended to be considered in stock valuation. Linkages cannot be formed when counterparts are not found in stock-increasing entries.
• Old transactions may also be messing up reporting because automatic linkages are only made from the current and active financial period. On stock reports, such as the Unlinked to product batches report, it is possible to see transactions from previous financial periods that cannot be linked because financial statements have already been made for them.

Note. It is the user's responsibility to check immediately upon activation that the linkages are correct and that necessary corrections are made.

Changes compared to regular stock handling - IMPORTANT

Automatic linkages (FIFO principle)

All stock-reducing stock transactions are automatically linked by the system to stock-increasing stock transactions, if these are found in the same stock to which the reducing entry is allocated. If no default stock is defined for the product card and no stock is selected for the sales order or invoice row, the sale is automatically allocated to the stock where the oldest product batch is found with FIFO.

• Automatic linkages with FIFO are always formed according to the stock transaction row's delivery date.
• The stock balance can be reduced to negative. In this case, linkage between transactions does not occur at the time of the transaction, but a stock replenishment must first be made.
• If a stock is selected for the sales order or invoice row where there are no goods, linkage is not made. Goods must always be recorded in the correct stock.

Changes brought by linkage handling to the stock transaction view 

Automatic linkage follows the chosen stock valuation method, i.e., linkages are made with FIFO to the oldest product batches in stock and with LIFO to the newest. Linkage brings the following practical changes to stock handling:

• The stock location is bound between linkages. For the stock-reducing stock transaction row, the stock is always set to the stock of the product batch to which the reduction is linked. The stock cannot be changed directly from the reducing stock row after linkage; instead, the linkage must first be released so that the reduction can be allocated to another stock. The linkage can be released:
  • on the sales order or invoice by changing the stock on the invoice row, which updates the stock designation in stock transactions
  • in the stock transaction view with the linkage tool
  • in the stock transaction view with the mass tool for multiple stock rows at once.
• For the reducing stock row, the unit price is always fetched from the unit price of the product batch to which the reduction is linked. The unit price cannot be changed directly on a linked reducing stock row. The linkage must be released or the row must be linked to another product batch, after which the new unit price and stock are updated on the stock row.

Unlinked stock row: Stock and purchase price can be freely edited on the stock row.

Linked stock row: Stock and unit price are fetched from the purchase batch. The linkage must be released to edit the fields. Below is an example of a green linked row that cannot be directly edited. To edit the stock or unit price of linked rows, first release the linkage or link the row to another batch, after which the new unit price and stock are updated on the stock row. There is a guide for releasing the linkage later on this page.

Exceptional linkage handling

There are two use cases where maintaining a product batch-specific tracing chain requires linkage handling that deviates from the norm:

1. Stock transfer (more on this at the end of this help page)
2. Credit note for goods return handling = goods return to stock

In exceptional linkage handling, the stock-increasing stock transaction row is linked to the stock-reducing transaction. This is the opposite direction compared to normal stock handling, where the reducing row is linked to the increasing.

Manual linkages (by the user)

The user can make linkages that deviate from automatic linkages, i.e., FIFO or LIFO, by manually changing them with the linkage tool. This allows the user to build precise tracing chains and report the movements of product batches in stocks from the vendor through stock to the customer.

This tracing chain enables, among other things, the formation of a customs report in Netvisor, which shows batch-wise which product batches have been reduced from stock in any given time range.

Terminology of transaction-based stock management (FIFO)

• TRANSACTION-BASED STOCK MANAGEMENT = Batch handling where stock can be tracked at the product batch level and tracing chains can be built for batches, allowing them to be traced retrospectively from the vendor through stocks to customers. In this handling, stock-reducing transactions are automatically linked according to the chosen stock valuation principle, either with FIFO or LIFO, to stock-increasing transactions. The user can also make linkages that deviate from this manually. In stock transfers, it is possible to maintain batch-specific traceability. Note. Batch handling does not include product-level traceability, such as serial numbers, etc.
• FIFO = First In, First Out procedure where the costs of the first purchased units are allocated to the first sold units. The procedure assumes that the materials and supplies that arrived first in stock are used first. According to the business tax law, inventory is calculated according to the FIFO method. In Netvisor, automatic linkages are allocated by default in transactions based on this principle when FIFO is selected as the stock valuation method.
• LIFO = Last In, First Out procedure where the costs of the last purchased units are allocated to the first sold units. The procedure assumes that the materials and supplies that arrived last are used first. The LIFO method can be applied periodically; valuation of use is performed continuously or only at the end of the period. In Netvisor, automatic linkages are allocated by default in transactions based on this principle when LIFO is selected as the stock valuation method.
• AUTOMATIC LINKAGE HANDLING = All stock-reducing stock transactions are automatically linked according to the chosen stock valuation method to stock-increasing batches if the system finds a target.
• MANUAL LINKAGE HANDLING = The user must link such transactions retrospectively that could not be automatically linked at the time of the transaction, e.g., goods were not in stock at the time of sale. For this purpose, the batch-based reports in stock management include the Unlinked to product batches report, which reports all such transactions, and linkages can be made retrospectively in mass. Changes to automatic linkages according to the chosen stock valuation method are also included in this manual linkage handling. This is needed, for example, when wanting to build a delivery and tracing chain from the vendor to the customer that deviates from the FIFO or LIFO procedure.
• LINKAGE TOOL = Manual linkages, releasing linkages, and removing linkages are done, with a few exceptions, with the linkage tool. The linkage tool can be accessed from the stock transaction row and the Unlinked to product batches report.
• TRACKING/TRACING HANDLING = Product batch tracking and tracing possibility from the vendor through stocks to customers. By default, tracing is built according to the chosen stock valuation method, either with FIFO or LIFO. The user can make linkages that deviate from this and achieve fully transaction-based tracking and tracing handling by manually changing the automatic linkages of transactions and allocating them to desired product batches.
• BATCH-BASED STOCK REPORTS = Reports utilize transaction-based stock and linkage handling in Netvisor. These reports are the Inventory list by product batch, product batch tracing report, customs report, and Unlinked to product batches transactions report.
• UNLINKED TO PRODUCT BATCHES TRANSACTIONS REPORT = Unlinked stock transaction rows are reported on this report. Through this, the user sees the overall situation of stock transactions and can make linkages retrospectively in mass for transactions.
• CUSTOMS REPORT = Customs require reporting at the batch level all product batches imported to Finland from abroad. This report supports this reporting process. The customs report shows batch-specific reductions, describing the customs-cleared goods allocated to the batch that arrived at customs as stock withdrawals.
• FREIGHT HANDLING = There is a separate field for freight on the purchase order and stock transaction row. This means that the product's Purchase price + Freight cost = NEW UNIT PRICE. It is possible to allocate the unit cost of freight to the product's unit price both in purchase order handling and individual stock transactions from its total cost. The purchase order has a separate allocation tool, where by entering the total freight amount, it is distributed to purchase order rows. The same function is found in the stock transaction view's mass tools menu.

Batch-based stock reports

Batch-based stock reports include the following reports:

• Inventory list by product batch
• Product batch tracing report
• Customs report
• Unlinked to product batches transactions
• Events targeted by linkages

Detailed descriptions of stock reports can be found in the Stock management reports help.

Stock transfer handling in product batch tracking

In stock transfer, always use the stock transaction type system type "Stock transfer" available in the system when the company has chosen FIFO or LIFO procedure as the stock valuation principle. User-created transaction types should not be used in stock transfer, as this breaks the product batch-specific tracing chain.

The Stock transfer transaction type includes a feature that links the stock-increasing entry of the stock transfer to the stock-reducing entry. This feature is not available for user-created transaction types.

Making a stock transfer

Netvisor has a dedicated tool for stock transfer. There is a separate Stock transfer help.

Frequently asked questions

Question 1: How do I activate FIFO calculation in Netvisor?
FIFO calculation is activated by selecting Products > Stock settings > Stock valuation method and changing the valuation method to FIFO calculation. After this, save the change, after which transaction-based stock valuation starts to use the FIFO principle.

Question 2: What happens to existing stock transactions when I activate transaction-based stock management?
After activation, the system performs an automatic conversion where reducing stock transactions are retrospectively linked to product batches according to the chosen valuation method (FIFO/LIFO). Not all transactions can necessarily be linked automatically, and these are shown on the Unlinked to product batches report, where you can review and correct the situation and make the linkages manually.

Question 3: What should I do if stock rows remain on the Unlinked to product batches report?
Check the rows shown on the report and determine the reason for the missing linkage, for example negative stock, wrong product name, or different stock designation. Make the necessary corrections (such as inventory, change of stock designation, or correction of product name) and link the rows manually to product batches. You can use the mass function on the report, which attempts to make the linkages automatically after the corrections.

Question 4: Why can I not change the stock or unit price on a linked stock row?
On a linked stock row, stock and unit price are fetched directly from the purchase batch. These details cannot be changed directly on the row because the linkage ensures product batch-specific traceability. If you want to change the stock or unit price, first release the linkage or link the row to another product batch with the linkage tool or mass tool.

Question 5: How do I ensure that product batch-specific traceability is preserved in stock transfers?
In stock transfers, you must always use the system's predefined transaction type "Stock transfer". This transaction type includes a feature that links the stock-increasing entry to the stock-reducing entry. If you use user-created transaction types, the product batch-specific tracing chain is broken.

Question 6: How can I deviate from automatic FIFO or LIFO linkage?
You can deviate from automatic linkage by using the linkage tool. With the linkage tool, you can change automatic linkages and allocate reducing stock transactions to the product batches you want. In this way, you can build tracing chains that deviate from the FIFO or LIFO principle, for example for customs reporting or customer-specific tracking.

Question 7: What do batch-based stock reports include and where can I find more information about them?
Batch-based stock reports include the Inventory list by product batch, product batch tracing report, customs report, Unlinked to product batches transactions report, and Events targeted by linkages report. Detailed descriptions of these reports can be found in the Stock management reports help.

Keywords: Transaction-based stock management, FIFO, LIFO, batch-based stock reports, stock transfer

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