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FIFO, LIFO, and Batch Costing: Which Stock Method Fits Your Shop
FIFO, LIFO, and batch costing explained for Nepali retailers and wholesalers: which method matches the shelf, and how to keep one costing rule in stock valuation.
FIFO means the oldest stock you bought is treated as sold first. LIFO treats the newest receipt as sold first. Batch costing keeps the actual cost of a lot with that lot. These change the profit you report when prices move. They do not change how many pieces are on the shelf.
For food and medicine, the shelf rule is often FEFO: the earliest expiry leaves first. That is a picking rule. It is not the same thing as FIFO. A later purchase can expire sooner.
Which method fits which shop
FIFO is the usual fit for grocery, hardware, and general retail. It follows the way staff are supposed to rotate stock, and it is the story most accountants expect. LIFO is rarely how a Nepali shop physically sells, and it can be the wrong method for your reporting. Ask before you choose it.
Batch costing fits importers, pharmacies, and anyone whose lots have very different costs. The profit on a sale follows the batch you actually issued. That only works if receiving created the batch.
The method is only as good as goods receipt
Enter each purchase with its real unit cost in Sajilo IMS. A batch or expiry item needs that lot identified at receipt. If every receipt is dumped into one quantity with a blank cost, no method can save the margin report.
Stock valuation then has a chance to mean something. Confirm during setup which valuation you are looking at, and do not “correct” profit by editing history after the goods have sold.
Do not mix methods to chase a number
Using FIFO in the software and a different story in the tax file creates two profits. Pick the method with your accountant, apply it to new receipts, and leave sold history alone.
Physical rotation can still be FEFO on the shelf while the books use FIFO or batch cost. Just do not pretend they are the same sentence.
Frequently asked questions
- Does the costing method change the quantity on hand?
- No. Quantity comes from receipts, sales, transfers, and adjustments. Costing only decides which cost is attached to what left.
- We never entered cost. Can we start now?
- Yes, on the next receipts. Old stock may need one opening cost you are willing to defend. Leaving it zero makes every sale look like pure profit.
Ready to tighten inventory control?
Register for Sajilo IMS or talk to our Nepal-based team about warehouses, stock, and reporting for your business.