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Forecast Inventory in Fathom
Forecast Inventory in Fathom

Model making stock purchases and using inventory in your forecast

Updated over a week ago

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Modelling inventory orders and useage

In Fathom, you’re able to model inventory or stock purchases and usage with journals and/or timing profiles. There are two main methods of modelling inventory in your forecast:

  1. Bulk or batch ordering inventory in advance

  2. Just in time ordering

Bulk or batch ordering in advance

To forecast making large orders of inventory or stock, you can model the inventory purchases with journals and the inventory reductions with timing profiles.

To model the purchase of inventory with a journal:

  1. Go to the impacted ‘Inventory’ account on the forecast Balance Sheet
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    ❗Note: The account should be classified as an Inventory account on the Balance Sheet. If it is not already classified as such, you can re-classify it in ‘Step 3 - Chart of Accounts’ in the company’s Settings.
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  2. Click on the cell date for when you want to purchase the inventory
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  3. In the menu that opens on the right, select the ‘+ Add custom journal’ option at the bottom
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  4. Name the journal
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  5. Increase the inventory account by the order amount
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  6. Select the ‘+ Add new line’ option
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  7. Decrease the cash account by the same amount
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    💡Pro Tip: If the purchase is not being made initially with cash, additional journals may need to be created to model the initial debt and then repayment.
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  8. Choose to make the journal a ‘One-off’ or ‘Repeating’ journal. Repeating journals can repeat every month or at a different monthly cadence. If repeating, you’ll need to choose an end date for the repeating journals.
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  9. Select ‘Create’

Now that you’ve modelled the purchase of inventory, you can model the usage or reduction of inventory through timing profiles with the correct account settings. To do this:

  1. Go to the corresponding ‘Cost of Sales’ account on the forecast Profit & Loss
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  2. Click on the name of the account
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  3. In the menu that opens on the right, select ‘Settings’ at the top
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  4. For the ‘Cash / final posting’ account, select the inventory account that will be reduced
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  5. Select the cell date in the ‘Cost of Sales’ account for when the inventory will begin to be used
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  6. In the menu that opens to the right, scroll down to the timing profile and click on the ‘Three dot’ icon
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  7. Select the option to create a ‘+ New profile’, unless editing a profile for multiple Cost of Sales accounts
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  8. Choose a ‘Monthly’ profile
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  9. Set the payment spread to be 100% in the ‘Same month’
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  10. Select the option to ‘Create Profile’

You’ve now modelled the reduction or usage of inventory.

To check the impact of the timing profile and journal you’ve created, you can click on the ‘Three dot’ icon next to the timing profile and choose the ‘Preview’ option to view how the timing profile impacts the Balance Sheet. You’re also able to view the Balance Sheet layer detail for the Inventory account to see the impacts of the Profit and Loss on that account.
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💡Pro Tip: Because the Inventory account on the Balance Sheet is consistently being reduced by the Cost of Sales account posting to it, you're able to see when the Inventory account will eventually reduce into negative values. This will help you identify when your next large inventory purchase should be.

Just in time ordering

You may want to forecast purchases of inventory made just before the inventory is used or sold. This method of inventory purchasing is often preferred for perishable items. You can model just in time ordering with timing profiles and specific account settings. To do this:

  1. Go to the impacted ‘Cost of Sales’ account on the forecast Profit & Loss
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  2. Click on the account’s name to access its settings
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  3. In the menu that opens to the right, select ‘Settings’ at the top
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  4. For ‘Pre-payments’, select the ‘Inventory’ account that will be reduced by the ‘Cost of Sales’ account
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    ❗Note: If you do not see the Inventory account as an option to select, then it may not be classified as an Inventory account on the Balance Sheet. If it is not already classified as such, you can re-classify it in ‘Step 3 - Chart of Accounts’ in the company’s Settings.
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  5. For the ‘Cash / final posting’ account, make sure it is the Cash account the inventory is purchased from
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  6. Now, select the cell date in the ‘Cost of Sales’ account for when the inventory will begin to be used
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  7. In the menu that opens to the right, scroll down to the timing profile and select the ‘Three dot’ icon.
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  8. Select the option to create a ‘+ New profile’, unless editing a profile for multiple Cost of Sales accounts.
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  9. You’ll likely want to choose a ‘Monthly’ profile
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  10. Set the payment spread according to when inventory purchases will be made. For example, if you’re purchasing all of the Inventory for that month in the month before it is used or reduced, then you can set the payment spread to be 100% in the month prior.
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    💡Pro Tip: If the purchase is not being made initially with cash, journals may need to be created to model the initial debt and then repayment.
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  11. Select ‘Create Profile’

You’ve now modelled the purchase and reduction or usage of inventory.

To check the impact of the timing profile you’ve created, you can click on the ‘Three dot’ icon next to the timing profile and choose the ‘Preview’ option to view how the timing profile impacts the Balance Sheet. You’re also able to view the Balance Sheet layer detail for the Inventory account to see the impacts of the Profit and Loss on that account.

Additional knowledge & common questions:

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