2nd of 5 posts related to item cost in Business Central

BC will use whatever cost layers you create when you load opening inventory. Here’s how to think about it if you need your inventory to be FIFO from Go Live in Business Central:

What BC needs for opening stock

• One or more Item Journal (or Physical Inventory Journal) lines per SKU.
• Each line becomes a separate FIFO layer with its own Unit Cost.
• If you post one big line (e.g., 100 units @ an average cost), then your first sales will relieve that single layer at that one cost until it’s gone—i.e., effectively average until that layer is depleted. This approach is what most clients I work with select.

If you want true FIFO from go-live

• Split the opening quantity into the actual layers you still have on hand (or a reasonable approximation), e.g.
  • 30 @ $10.00 (older receipts) – earlier posting date/time
  • 20 @ $11.25 – slightly later posting date/time
  • 50 @ $12.10 – latest
  • I would need to verify this, but I believe when the dates are all the same, the earliest Item Ledger Entry No. is relieved of inventory first. If so, then entering the entries all with one date the oldest item ledger entry would be relieved of quantity first.
• Set Posting Date/time so the oldest costs have the earliest timestamps (that’s what FIFO will consume first).
• Enter Unit Cost explicitly on each line (don’t rely on the Item Card’s Unit Cost).
• Include lot/serial tracking on the lines if you use item tracking.

Manufacturing note (if you have production)

• Finished goods on hand at cutover can be loaded as positive adjustments at their known unit cost (creates one FIFO layer), or you can post Output/Consumption to rebuild them (more work but creates more granular layers).
• If exact final costs are known later, use a Revaluation Journal to true them up.

Don’t forget

• Run Adjust Cost – Item Entries after posting the opening load (and routinely thereafter) so costs flow and COGS stays correct.

Rule of thumb:

• Want simple? Post one line per SKU with a single unit cost (you’ll get “average-like” COGS until that layer is used up). This might be what you are referring to when you asked your question.
• Want accurate FIFO from day one? Post multiple lines per SKU reflecting the real remaining receipts (oldest first) with their unit costs.