Tips on Average Cost Accounting in NetSuite

First and foremost, welcome to our blog! Here at IT-Ration Consulting, we've been in the NetSuite business for over 6 years now, and we thought we could share some of our extensive knowledge to the general NetSuite community.

As a first post, I'd like to talk a bit about the Average Cost costing method and how it's managed in NetSuite. The most important thing to keep in mind if you're planning to use Average Cost as your costing method in NetSuite is that the average price is calculated from the Item Receipt record. That means any discrepancies between your Purchase Order, Item Receipt and Vendor Bill may impact your Inventory Asset and Cost of Goods Sold accounts.

In fact, any difference in item rate between the Item Receipt and Bill is sent to the Inventory Received Not Billed account. This can cause many headaches when it comes time to complete your account reconciliation. It can also skew your company’s profitability quite a bit.

The simplest solution is to always make sure your Purchase Order, Bills and associated Item Receipt have the same item rates. This can be taken care of manually by diligent users, but some scripting and customization can automatically take care of this for you as well.

If you'd like more information on the Average Cost costing method in NetSuite as well as potential solutions, my co-worker has written a great whitepaper entitled "Item Average Cost Impacts in NetSuite".

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