Odoo 16 Automatic Inventory Valuation

Inventory value is a critical component of effective inventory management. Once calculated, the inventory valuation amount is added to the overall value of the company.

Warehouse staff doing cycle counting of the products) or automatically (through the database can do manually this process in Odoo ().

In this article, we will look at the ideas, configuration, and best practices for configuring Odoo 16’s automatic inventory valuation.

Odoo 16 Automatic Inventory Valuation Configuration

Follow these steps to configure automated valuation in Odoo 16:

    To access Inventory Settings, go to Inventory > Configuration > Settings in your Odoo dashboard.

Method of Inventory Valuation: Select your desired valuation technique (FIFO, LIFO, Average Cost, or Standard Price) under the Inventory Valuation section.

By default, this approach will be applied to all items, but you can change it for each one individually.

Configure Odoo Inventory Valuation Methods

FIFO (First-In, First-Out)

How it works: I assumed the first products added to your inventory to be the first to be sold. The cost of goods sold (COGS) is calculated using the oldest items in stock.

Advantages: Reflects real-world scenarios and is under widely accepted accounting principles (GAAP).

Last-in, first-out (LIFO)

LIFO works on the premise that the most recently acquired products are the first to be sold. It computes COGS based on the most recent items in stock.

Advantages: In some countries, it might lower tax liabilities, especially during periods of high inflation.

Average Price

The average cost calculates the cost of items in stock by taking the average of their purchase prices.

Benefits: It is simple and straightforward to use, and it evens out oscillations.

Average Cost

How it works: Average cost calculates the cost of items in stock as an average of their purchase prices.

Advantages: Simple and easy to use, evens out fluctuations in purchase prices.

Standard Cost

How it works: Standard cost assigns a fixed cost to each item regardless of the actual purchase price. Any variances between standard and actual costs are recorded separately.

Advantages: Useful for stable, predictable production environments.

Setting Product Prices

You can define particular costs for each product in your inventory by going to Inventory > Master Data > Products.

You can also enter the cost price, sale price, and other pertinent information for each product here. This gives you more detailed control over inventory valuation.

Odoo Inventory Valuation Journal Entries In Odoo,

Automatic inventory valuations are reflected in the journal entry panel of the accounting application. In this extensive store of accounting data, inventory valuation entries can be distinguished by looking at the values ​​in the Journal column.

Here’s an overview of how Odoo handles inventory valuation journals:

Purchase of inventory: When purchasing Odoo Warehouse products, the system automatically creates the necessary journals. Here is a simplified example of a purchase transaction:

Debit (more) Inventory: The value of the purchased products is debited from the inventory account. Credit (reduction) payments or cash: the amount paid for inventory is credited to the corresponding account.

Stock sale: If you sell Odoos Warehouse products, the system also creates the necessary journals. Here is a simplified example of a sales transaction: Debit (deduction) Cost of goods sold (COGS): The cost of goods sold is debited from the COGS account according to the chosen valuation method (FIFO, LIFO, average cost). Credit of sales revenue (increasing): Sales revenue is credited to the sales revenue account.

Stock valuation changes: Occasionally or as required, changes can be made in Odoo to guarantee that the stock qualities line up with the genuine stock. These changes bring about the making of diaries in Odoo, which regularly incorporate alterations to the stock worth record and related change accounts.

Personalization: It is critical to accommodate the stock with the Odoo records to guarantee precise monetary revealing. This cycle might include changing stock qualities and making suitable diary sections to line up with the picked valuation strategy.

Revealing and examination

Odoo provides tools for inventory tracking and informed analysis. Key reports incorporate the Stock Valuation Report, which shows the worth of the stock in view of the chosen valuation technique. The Stock Development Report tracks stock growth, and the Expense Examination Report analyzes regular expense costs. With the programmed valuation highlight in Odoo 16, stock administration turns out to be more productive, cost following becomes simpler, and monetary examination turns out to be more solid.