When supplier prices change on your products
Why a gym's till takes cost of sales from one fixed cost per product, and what to do when the supplier of shakes or supplements raises its prices.
By Achekam · · 4 min read · For Fitness businesses in South Africa, Nigeria, Kenya
Your supplement supplier sends a new price list. The tub of whey that cost you one amount last quarter now costs noticeably more, and so do the pre-workout and the protein bars. You pay the new prices without a second thought. The till does not notice at all.
That gap between what you pay and what the books think you paid is the subject of this article. It explains how Achekam works out cost of sales for products sold at the front desk, why a price rise does not flow through by itself, and the two practical ways to keep your gross margin honest.
One cost price, typed once
Every product your desk sells is created in the Item Master in the Accounting menu, with its SKU, name, category, selling price, cost price, opening quantity and VAT treatment. The Item Master needs the Point of Sale, Warehousing or Wholesale add-on.
That cost price does real work. Every till sale that reaches the server posts a balanced journal in the same step, and part of that journal is cost of sales against inventory at the product's cost price. Sell a shake, and the books record the shake's cost leaving stock and landing in cost of sales, using the figure typed into the Item Master.
No FIFO, no averaging
Many stock systems recalculate cost as deliveries arrive at different prices. First-in, first-out (FIFO) assumes the oldest stock sells first and uses its cost until it runs out. Weighted-average costing blends old and new prices into one running figure.
Achekam does neither. Cost of sales uses the single cost price typed on the product, with no FIFO or weighted-average costing. Whatever the supplier charged on the latest delivery, the till keeps using the original figure.
No screen to change the product
The obvious fix would be to open the product and type the new cost. At the time of writing, no screen lets a business change a product's price, cost or VAT treatment after creating it, or deactivate it.
That affects more than cost. When a supplier raises prices, most gyms raise the selling price too, and the selling price cannot be changed on the existing product either. So a supplier price rise usually means a decision about the product, not just its cost.
Option one: a new product for the new price
The cleanest approach for a lasting change is to create a new product carrying the new cost and the new selling price.
- Give it its own SKU and a name staff can tell apart at the till, such as one that mentions the new batch.
- Sell the old stock first under the old product, then stop ringing it up. Since it cannot be deactivated, tell the desk clearly which one is current.
- Know what the opening quantity does. A new product's opening quantity puts that stock on the till's count. Opening quantities do not post to the general ledger, and goods received against a purchase order do not add stock, so the delivery reaches the ledger through your supplier bill and your accountant's entries, not through the product.
A worked example in words: a gym's best-selling protein shake goes up in cost. The manager creates a second product with a new SKU, the new cost and a higher selling price, with the remaining delivery as its opening quantity. Reception is told to ring up the old shake until its stock runs out, then only the new one. From that day, every sale of the new shake posts cost of sales at the current cost.
The trade-off is clutter. A product list that grows by one line every price rise needs good naming, or the desk will pick the wrong one.
Option two: a journal adjustment agreed with your accountant
For small or frequent changes, a new product every time is too much. The alternative is to leave the products alone and correct cost of sales in the ledger at month-end.
- Work out how many units of each affected product were sold in the month.
- Compare the cost the till posted (units times the typed cost) with what those units really cost you.
- Your accountant posts a manual journal for the difference between cost of sales and inventory.
A manual journal must balance, and one dated in a closed month is refused, so the adjustment belongs before the month is closed. A posted journal is corrected only by a reversal. Agree the method once with your accountant and keep the working with the month's records.
Keeping gross margin honest
Management accounts show an income statement for a chosen period beside the period before, added up from your own journals. Gross margin there is revenue less cost of sales, so it is only as good as the cost figures behind it. If the costs on your products are a year old and the supplier has raised prices twice, your shakes look more profitable than they are.
A quarterly habit keeps it real:
- Pull the latest supplier invoices for your top-selling products.
- Compare each one's real cost with the cost typed on the product.
- Where the gap matters, choose option one or option two, and note which.
The stock side of this, from opening quantities to low-stock flags, is covered in selling supplements and drinks at the front desk. When product reaches its expiry date, counting expired supplements deals with the write-off. For the accounting principle behind cost formulas, the IFRS Foundation's summary of IAS 2 Inventories explains how the cost of inventories is determined, which cost formulas may be used, and why inventories are carried at the lower of cost and net realisable value.
A fixed cost price is simple and predictable, but it will not chase your supplier's price list for you. Check it every quarter, and decide each time whether a new product or a month-end journal fits the change better.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
