How negative stock affects costing
When stock is negative, the weighted average cost calculation can produce inflated results. Here is how:
A product has 5 units at $10 each (stock value = $50).
Sales reduce the quantity to -3 (the stock value becomes negative or zero while the cost-per-unit calculation is disrupted).
A purchase order delivers 10 units at 120).
Note: The system must reconcile the -3 balance with the incoming 10 units, resulting in 7 units on hand.
In earlier versions of Zenoti, the average cost after this scenario could be significantly higher than the $12 purchase price because the system applied the standard weighted average formula across the negative-to-positive transition.
FIFO-based correction (2024): Zenoti introduced a correction that resets the weighted average cost when stock transitions from negative to positive. The rule is: when a purchase order delivery brings on-hand quantity from negative to positive, the moving average cost resets to the unit price of the incoming lot rather than blending it with the distorted negative-balance cost.
Worked example with the correction:
A product has 5 units at $10 each (stock value = $50).
Sales reduce the quantity to -3.
A purchase order delivers 10 units at 120).
Without the correction, the standard weighted average formula would calculate: ($0 + $120) / (−3 + 10) = $120 / 7 = $17.14 — significantly higher than the actual $12 purchase price.
With the FIFO-based correction, Zenoti resets the cost: the 3 units that bring the balance from -3 to 0 absorb the incoming $12 cost, and the remaining 7 units are valued at 12.00**, accurately reflecting the actual procurement price.