

Ask HN: Financial Forecast for Inventory Based Product - cgherb911

Hi I'm trying to do some basic financial forecasting for a business that has inventory.  We occur the cost of materials in one month.  Should i record that into the cogs in one month or have it related to sales and spread out with the rest of the cogs?
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JacobAldridge
IANAA, but would suggest this depends on the purpose of the Financial
Forecasting.

If you're trying to run a cashflow projection, you probably need to record
cogs in the month the cost is incurred.

If you're trying to determine margins, it may be better to records cogs when
they're actually sold - just be sure to factor in any loan costs that may be
associated (and ignore 'opportunity costs' from purchasing early, because you
may as well pull figures out of thin air).

If the forecasting impacts on Tax, then that probably throws another spanner
into the works, which I can't really help with.

Edit - you may also want to post the question over at Chuwe.com - hits their
audience nicely.

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cgherb911
Very Helpful, Thanks!

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yannis
Anything Financial can benefit from Pacioli's treatise
(<http://en.wikipedia.org/wiki/Luca_Pacioli>) :)!

If you modeling using a spreadsheet or by pulling records off a database or an
old and ancient ledger the method is the same:

\- When you Purchase

    
    
       debit stock,  credit Creditor
    

\- When you Pay

    
    
       debit Creditor, credit Bank
    

\- When you Sell

    
    
        credit stock,  debit customer + 
          debit profit (difference between sales price 
          and purchase price)
    

\- When you receive the money (if you selling on credit)

    
    
        credit debtor, debit bank
    
    

When I started in coding normal accounting methods seemed long and convoluted!
However, as the years went by I discovered that this is the easier way to
visualize the flow of financial transcactions and it automatically caters for
time.

We should call any db based on this as a Pacioli's Datastructure:)

As a bonus, the method includes a test. The sum of all the above transcactions
=== 0;

