When viewing an item record in Cloud POS backoffice, you may notice there are three different fields that refer to the Item Cost.

This article explains what each field represents and how they are updated as you use the system.

It's important to note that this functionality is only effective if you are strict about updating your cost prices as you receive goods into the business.  The value of the information here is dependent on good practice being followed elsewhere within Cloud POS processes.

Supplier Cost

Although this field appears furthest down the item record of the three cost fields, this is a key detail to start with.  The figure entered here directly affects the other cost fields and is arguably the most important of the three pieces of information.

When you first create the item in your Cloud POS database (either manually or via SIM), the cost price you set here should be the price you would pay the supplier for that item, at that particular time.  In the example below, our cost for the item is £8.00, so we've set that in the Unit Cost field.

As time goes by, the price you pay your supplier for that item may change.  To ensure your supplier cost remains accurate, you should ensure you update the cost field when you receive items into stock at Goods In, so that the cost matches what you actually paid for the item on that order.

In the example below, the next time we've ordered the item from our supplier, our cost has increased to £8.50, so we've updated the Cost field on the Purchase Order whilst booking the item into stock:

As a result of doing this, Cloud POS will update the Unit Cost field for us, to reflect the new cost we paid the supplier for the item:

So, providing you are disciplined about updating your cost prices as you receive goods into the business, the Supplier Cost will display the most recent price your business paid the supplier for that item.

However, if you use the Modify Supplier Information Wizard to update your supplier cost prices, this will overwrite the cost field with the current cost the supplier would charge you for the item.

Both these pieces of functionality help to keep an accurate picture of what an item costs your business to purchase from the supplier.

In situations where you buy a box of items from your supplier, but sell the contents of that box as individual items, please follow the guidance in the Related Article entitled How do I deal with items I purchase by the box but sell individually?

Inventory Cost

This section of the item record shows each of the stores within your Cloud POS group, and the average weighted cost of the item at store level, represented in the Cost column:

To understand how the average weighted cost is calculated at store level, this figure is reached by dividing the total cost of an item by the quantity you hold in stock at that store.

Using our examples above, we started with one item in stock, and we had paid our supplier £8.00 for that item. At this point, the Cost of the item displayed as £8.00.

When we received the second item into stock, our supplier had increased the cost price to £8.50.  Our Cost now shows as £8.25.  Why?

The two items we hold in stock have cost us £16.50 in total (£8.00 + £8.50), so the average cost we have paid for each item is £8.25 (£16.50 ÷ 2).

This is a key detail to understand, as it gives an accurate valuation of your stock holding of an item.  This becomes even more important if you have multiple stores in your Cloud POS group, as different stores may have different cost prices for the same item.

In a multi-store environment, the average weighted cost price of an item at store level, will 'follow' that item if stock is transferred to another store.

Average Weighted Cost

The easiest way to describe this field, is that it is a global view of the average cost paid for all current stock of the item within the business.

We can explain this with a calculation based on the below:

At Steve Test Store, we have two of the item in stock and have a paid an average of £8.25 for that item, so our stockholding at that store is valued at £16.50.

At Steve Test Store 2, we have five of the item in stock and have a paid an average of £10.40 for that item, so our stockholding at that store is valued at £52.00.

There is no stock of the item at Steve Warehouse, so the cost price here doesn't contribute to our average weighted cost figure.  

So how is this calculated?

We add the two stores' stock values together, and then divide this by the total number of items in stock in the business.

£16.50 + £52.00 = £68.50

£68.50 ÷ 7 = £9.79

So, the Average Weighted Cost is a global figure, and therefore in a multi-store environment, it shouldn't be of too much importance for individual stores.  Each store should look at the Cost figure at their store in the Inventory section of an item record instead, as this will be accurate to their store.

For a more detailed look at Average Weighted Costs, and some further examples of how stock movements can affect this figure, please see the Related Article entitled Understanding Average Weighted Cost.