Stock Valuation Settings

Hi

I am looking to clarify something.

When inputting the value per litre for WIP this can be a figure for labour and utilities combined ( saves time inputting each batch). Does the figure for WIP automatically transfer to the additional cost of packaged beer valuation and then I just need to add additional labour or packing costs.

Or do i have to manually add the WIP valuation to each packaged valuation.

Many Thanks
Rodger

Hi Rodger,

Thanks for the question. It’s a really good one, and I think the UI around that area should definitely look to make this a bit clearer.

Yes, that’s right, the “WIP stock valuation addition per litre” (screenshot below) is carried through to the packaged beer valuations as well.

So that figure forms the base cost that will be added both to WIP beer and packaged beer, then the “additional value per container” will be added on top of that to any packaged beer items of that container type.

Hope that clarifies it, but please let us know if you have any other questions.

Thanks,
Max

Hi
Does this only effect things going forward from the date you change the WIP stock valuation addition per litre? If so how can you adjust older ones?
Thanks
John

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Hi John,

Yes that’s right, the WIP stock valuation addition per litre is saved against the batch at the point the batch is started, so it will only affect batches moving forwards.

It currently isn’t possible to retrospectively edit this on each batch, but we can certainly make this possible! I’ll add it to our feature requests list and let you know here once it’s sorted.

Thanks,
Max

cheers thanks for that

Hi guys, just wanted to bring up a point on this as I believe the stock valuation for packaged beer is slightly wrong. Currently it looks as if though the packaged beer stock valuation is based on the WIP per litre price which doesn’t then take into account the yield of the batch which would make the cost of the packaged beer go up. This means we’re undervaluing our packaged beer stock quite considerably which is throwing our accounts out. Let me know if you agree.

Cheers

Woof. this is a bit shocking.

I indeed just checked and with the first batch I checked the cost of a can ex duty is 0.41cts whereas the valuation thinks its only 37cts. That is a very significant difference that will influence our numbers quite a bit.

Could you elaborate please?

Thanks.

Apologies for the slow response here and for any concern over the stock valuation.

We’re confident that the stock valuation process is working as intended, but I think this is one of those situations where there’s more than one method of calculation, with no “clear winner” on how is best to do it - each has their pros and cons.

Essentially there is a difference between the “cost to produce” and the “value”, and this looks to be what is causing the confusion mentioned here. The batch cost report and margin reports show you the “cost to produce”, which may be different from the stock’s “value”.

Breww will track the per-litre cost of the beer for valuation purposes and use that on the stock valuation report. This is slightly different to the costings used for margin reports in Breww. This is further explained here at How are batch costings and WIP value calculated in Breww?.

This is something we’ve discussed a lot internally and also with a number of customers. The main issue with using the costing calculation used by the margin reports is that if, for example, you spent £1,000 producing 1,000L of beer and then packaged it into a single 500ml bottle before the rest of the batch was lost for some reason, the bottle would be valued at £1,000 - which is clearly not a fair valuation for a single bottle of beer. With the per-litre valuation method, the bottle is instead valued at a much more realistic £0.50, which is why Breww uses this method as the starting point for calculating the initial value.

This is just the valuation’s starting point, however, and you can then adjust the “WIP (work-in-progress) stock valuation addition per Litre” in ReportingStock valuationsValuation settings, which will add a per-litre value to the WIP beer which is also carried through to each packaged item for the purposes of stock valuations. This can be used to increase the value based on what you’d consider an average wastage value per litre (and any other aspects that you feel increase the value per litre of the beer). This can also be added on a per packaged container type basis too.

In March, we added support for expected wastage on a recipe, but this isn’t taken into account by the stock valuation and possibly should start to be? We’ve also been looking at adding an “Expected batch wastage %” as well which we think would be a really useful additional option to the valuation settings, but we don’t have any requests for it externally so it hasn’t yet made it to the top of the list.

If updating the valuation based on expected wastage on the recipe (or a default percentage for recipes without this figure stored) would be useful, please let us know and we can add this to the feature requests section, to gain some traction and monitor it through to implementation.

Another key point is that it’s often considered important for stock to maintain a consistent value on your valuation so that each month when management accounts are produced, they accurately reflect the business’s position. Our chosen method of stock valuation keeps the value of the stock consistent from month to month. It would theoretically be possible, for us to the per-litre value for in-progress batches and then when a batch is completed, switch its stock over to be re-valued as per the cost report’s method, but this would mean that even without any sales or stock quantity changes you might have a jump in the valuation and it would look like you’d made a profit or lost money in the month. Possibly this could become an option, so you could enable this if you wanted.

I hope that makes sense, but please let us know if you have any questions on this.

Hi Luke,

Thanks for the explanation, I hope I understand it but i am still confused.

Could you please elaborate what Breww’s definition of value is if it is not the actual costs to produce a product? If a batch costs 1000 euros and leads to 1000 bottles the actual value of that bottle is 1 - whether it is “fair” or not. It is not for Breww to decide it should be of less value in my opinion

Especially because it also works the other way, as there is no account for losses/or is based on actual yield there is a serious risk of undervaluing high value.

e.g. We set our vessels at a fairly arbitrary number. e.g. 1300L as this is the absolute max amount we could pump into them - for small beers we might get 1250L out of them. But bigger beers might yield 1000, which is a conscious decision. We create a lot of varied beers, the size of the vessel rarely corresponds to the yield. Hence it is absolutely crucial the loss is included in all valuations as now a DIPA generating 1000 liters is significantly undervalued if Breww thinks it should be 1300.

A bit of general feedback is that I find the multitude of ways to calculate things (with or without loss, with or without additional costs, with or without duty) in Breww a real thorn in my eye. For the 6 months I used Breww I very often get confused about the why, where, how and what of numbers - which I find to be quite stressfull and fuels a distrust of the numbers Breww generates for me. It is frankly the only time I am missing my old spreadsheets, which says something about my appreciation for Breww, but also obstructs me from recommending it to others.

Thanks Gijs.

In the nicest possible way, I disagree. The main purpose of regular stock valuation is for your accounts and for your accountants (and even insurance purposes), I don’t think “pretending” that a single bottle is worth more than it really is, just because that’s what it cost you to make, is correct. To Breww, the “value” of something is what it is “worth”. This is of course closely linked to what it cost and in some cases, this will be the same, but it’s not necessarily the same.

If we play through this situation (contrived example, I know, but it illustrates the point):

  • You create a batch that costs you 1000 euros for 1000 litres.
  • You expect to package 2000 x 0.5L bottles from this batch at a cost of 0.5 euros each.
  • You package your first bottle, then something goes wrong and the remaining 999.5 litres are lost.
  • This one bottle that was packaged can be sold for the usual price (say 5 euros). The consumer buying the beer doesn’t care that you had a disaster and this bottle cost you 1000 euros to make, it’s still “worth” 5 euros to them. And it’s still “worth” 0.5 euros to you, just like all the other batches of this beer before and after this one.
  • At this point - In Breww’s calculation:
    • You have a bottle that’s worth 0.5 euros, just like normal.
    • You do your monthly accounts - the stock valuation, shows a drop of 1000 euros on your ingredient stock items value and an increase of 0.5 euros for the one bottle.
    • Your account show a “loss” of 999.5 euros for this month (assuming nothing else happened). This is fair and reasonable from an accounting point of view. Financial auditors and accountants would be happy that this was a reasonable valuation of your stock. It’s a great shame that the 999.5 euros were lost, but that’s a fair reflection of the truth - the beer was lost after all.
  • At this point - In the calculation where “value” equals “cost to produce”:
    • You have a bottle that’s worth 1000 euros. Your other bottles of the same beer are worth 0.5 euros.
    • You do your monthly accounts - the stock valuation shows a drop of 1000 euros on your ingredient stock items value and an increase of 1000 euros for the one bottle.
    • Your accounts show no profit, or loss, for this month (assuming nothing else happened). This isn’t a fair reflection of the truth, you sadly had 999.5 euros of beer lost. This month would look like a success, when in fact it wasn’t. If you were financially audited, the auditors would come in and consider this not a fair value to attribute to the one bottle of beer that you can only sell for 5 euros to your customer.
    • At some point in the future, potentially months later, you would allocate this particular bottle of beer to a delivery and in that one delivery, you’d suddenly drop 1000 euros from your stock valuation.
    • You’d do your next month’s accounts and think “Wow, what happened, why did we suddenly lose 1000 euros (ish) more than normal.” You may well have someone else in the accounts department searching everywhere for what went wrong, what was missed from the accounts, and why there’s an expected hole of 1000 euros.

Both versions result in the same position financially in the end, but Breww’s version puts that loss in the correct month and doesn’t defer it to a potentially unpredictable later date, and would also allow you to pass a financial audit. I appreciate that your business may not be audited and I certainly don’t know what the rules for auditing companies are in NL, but my previous business was built to the point where we were legally required to be audited in the UK so I have a few years of experience of that “fun” and can say with absolute certainty that if you tried to persuade an auditor that a single bottle of beer that could be sold for 5 euros was “valued” at 1000 euros, it wouldn’t fly.

Here’s a different example, but I feel it’s relevant to show the difference between “cost” and “value” - If you were to purchase some grain for 100 euros, plus 20 euros for delivery, this would go into your stock with a landed cost of 120 euros. This would also result in it being on your stock valuation for 120 euros as this is what it cost you to get it. All good for now…

If a mouse got into this bag of grain and contaminated it, you might still have it on the shelf, but it cannot be used and would have to be “valued” at 0 euros. I don’t think this point would be contested. What something “cost” is a great starting point for determining its “value” or “how much it’s worth”, but it’s not the only factor. We see the “lost” beer in the example above in the same light as the lost grain in the bag contaminated by a mouse.

I would agree with this, but Breww has to follow a calculation, and the default calculation can’t really be something that could cause some of our other customers problems justifying it to auditors or even their own accounts department.

We’re more than happy to look at adding other methods of valuing stock as well, and then it can be the user and their accountant who decides how they’d like it valued. For example, it would be possible to value the 0.5L bottle in the example above at the 5 euros the customer is willing to pay for it. If this, or any other method of valuing stock was of interest, we would be very happy to look at adding a “Valuation method” option, that allowed even more control over how your stock is valued.

I also think the idea of using an expected wastage to reduce the size of a batch for typical wastage for valuation purposes is a great suggestion and would largely negate the issue for everyone, resulting in fair and predictable values for stock.

Just to clarify, the number that Breww looks at is the volume transferred from the brewing system to the first vessel on the batch, the capacity set on the vessel isn’t relevant. You could have a 1300L vessel and brew a 50L batch and the costings would all be upon the 50L, not 1300L.

I’m sorry to hear this but do appreciate the comments as it’s very valuable feedback to us, thank you. Let’s get to the bottom of the stock valuation query here first and then if there are any other numbers that you’d like us to clarify the calculation of, we can certainly do so to give you the confidence that you need in them.

We really appreciate all your feedback here and want to make sure Breww is working well for everyone. We don’t push back on suggestions like yours lightly, we’re just trying to make sure we build the best possible product that works well for all breweries, and we find that bouncing ideas like this around is conducive to building the best possible solution.

Thanks luke for the elaborate reply. I understand a bit better where you are coming from although we still run into issues here. Your approach sees a loss as a deviation (the mouse, a ruinied breww) as creating a loss of value - whereas a certain amount of loss is part of the costprice ánd value of the beer.

To use the amount moved from brewery to vessel without taking into account future losses influences our numbers greatly as we use a fairly arbitrary number here. This has three reasons:

  • We don’t know exactly how much we have in tank (this is our end, we just don’t have the flow meters)
  • We have had issues with auto-rescaling of recipes when we but in a lower volume than the 1300 liter related to the vessel while brewing and no time yet how to work around it.
  • We ran into issues when the amount in tank is lower than the actual number as we then we run into issues as it does not want to package and the whole process of brewing etc. needs to be repeated which is very annoying - so we high ball everything.

In order for us to make breww workable in an every day context we just breww at full vessel amount. We input the expected loss on recipe and brew level so we that have a good sense what the costprice of the beer is, which we then relate to our sales price - which works pretty well in a day to day context.

However it now turns out this is not used in valuations. Which suggest we are seriously lowballing our valuations - making our numbers and results not really reliable. At least if the expected yield is included this would make the numbers and value more realistic.

Thanks Gijs, it sounds like the right next step here is for us to add into the valuation tool the option to use the recipe expected losses. This should get you to a very workable number and shouldn’t be too complex from our side. We’ll look to get this implemented urgently as we understand the importance of this.

As of fairly recently, you can disable recipe scaling on batches to have Breww use your recipe quantities as-is regardless of the volume you enter. I appreciate this doesn’t solve everything, but it’s probably useful to know. This can be disabled (by default) in SettingsProduction settings and unticking the box at the top.

We’ll update you here when this new option is available :+1:

Hi Luke, thanks for the detailed explanations above, it’s all very useful. I’m mostly with Gijs on this one in that we would still consider the cost of packaged stock to be based on the yield from each batch, not the WIP per litre price. I see your point about audibility but I personally don’t believe that it would be an issue with accountants/auditors for us to use this method of stock valuation over the one Breww currently uses for packaged stock. In terms of management accounts, I would prefer to see stock loses come through to the P&L at the time of sale, rather than racking/production. By your example above with Breww’s calculation, if there was a loss of 999.5 euros for the month I would want to find out what had happened. The first place I’d probably look was the margin by invoice reports to check if any products had been sold at a loss. Breww would show that the invoices were all sold at the correct margin as the packaged stock had been valued using the WIP per litre price. I’d probably then have to start looking at the stock takes, batch costs and yields to find where the loss had come form. If however it was using the other valuation method, the loss wouldn’t appear until a month when the product had actually been sold. If starting with looking at the margin by invoice reports, I would quickly see that an invoice selling the bottle packaged had been at a loss and then be able to look into that batch that was sold and find the loss on racking quickly.

It seems as if though with a lot of stuff in Breww, people use different methods for different processes so more flexibility would be good. I think the suggestion of using an expected wastage or yield % for each batch and/or beer in valuations would be a great tool and largely solve the issue for us and it may even be better than using the yield on every batch to determine the packaged stock value.

Thanks

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Thanks Jack. Yes, we’ll get the extra option added as soon as we can for you and potentially look at other options in the future too :+1:

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2 posts were split to a new topic: Split batch costs in stock valuations into seperate colums in export files

Just a quick update - the new options for valuing stock are nearly complete, but sadly won’t have completed testing before the end of the month, as we’d originally hoped.

We’ll have the new options live for you next week so you can try them out before the end of August valuation. I’m sorry we didn’t manage to get this over the line before the end of this month, but it will certainly be ready for next month. Thanks for your patience on this.

Thanks Luke, just another thought I had last week when processing inventory receipts.

Was there a reason that we can’t have the option to do a stock valuation at a certain point back in time? For the inventory stock values to be correct, the prices on the inventory receipts need to be correct. This isn’t always the case for us as some actual prices from suppliers have been changing from what we record as the supplier price in Breww. The production team that input & process the inventory receipts are processing based on the delivery notes from suppliers which often don’t contain the prices. This means that towards the end of the month I go through all the inventory receipts and amend the prices based on invoices as well as adding in delivery charges to get the landed unit cost. If we receive invoices at the end of the month, I sometimes don’t have time to amend the inventory receipt prices before the automatic stock valuation is done on the 1st of the month. In this case I’m adjusting the prices after the end of the month but need to get an updated valuation for a few days prior which I can’t currently do. Hope that makes sense.

Thanks

The reason that you can only (currently at least) run a valuation for “right now” is because it’s easy and fast for Breww to look at all the stock you have in stock currently and its cost to you.

It would theoretically be possible for Breww to generate a valuation for a time in the past, but this would involve Breww having to “rewind time” and revert out all the changes (goods received, used in batches, removed from stock manually, etc) to determine the previous quantities in stock. This would be incredibly time-consuming and resource-intensive, and likely we’d have to restructure how we store this data under the hood to make it even feasible to generate a valuation in a sensible amount of time.

I do see where you’re coming from and why this would be useful. You’re welcome to post this as a feature request, but to be honest, it would need a lot of votes to get done as it would be a very significant project to build and ensure we maintained the required recourses to continue to support it… but if there’s enough support for it, I’m sure we could look to implement it.

In absence of this, assuming the number of changes to make after month-end is quite small each month, you could take the CSV export version, open it in Excel (or similar) and update the “Value per quantity” column to the corrected figure. The final (Total) column could then be swapped to a formula and a grand total generated. I realise this isn’t as good as being able to run valuations historically in Breww, but I hope it helps :+1:

Thanks for this Luke. It seems as if though it would be a huge task for you guys to make historical valuations a feature so I’ll just add into my processes to keep on top of inventory receipts towards month end or edit the export version.

Cheers

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Hi all - this is now live! :tada:

We ended up implementing what we’ve called Wastage options and have added three options to choose from: one that uses the recipe’s expected wastage and another that simply uses cost to produce when valuing your beer stock. You can read more about the three options and how they’re calculated here:

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