Income by Customer Report is showing inaccurate profits
I'll start with an example because I'm really not sure what is causing this issue.
As I'm viewing the details of an income report for one of our customers, I notice that there are multiple orders that show we are losing money when really we are making money.
QTY - 20,000
Cost - .84
QTY - 20000
Cost - .86
Profit - $400
Now when I view this order in Income by Customer the debits and credits show as following...
(Shows a loss)
The only thing I can think of is that quickbooks is using average cost even when we enter our own cost in. Makes no sense to me why it would do this, especially if the cost is constantly changing due to market fluctuations. This makes our business unable to run a remotely reliable profitability analysis for each customer.
Any help would be appreciated. Is there a way to turn off average costs? Is there something else that is throwing the numbers off?
Thanks for visiting the Community. I appreciate the information you've shared. Yes, QuickBooks uses the average cost to determine the value of the item.
When you sell an item with insufficient quantity, your item cost will become your default average cost, and will be posted in your COGS account. Check out this article for more insights: Understand inventory assets and COGS tracking.
At the moment, there isn't a way to turn off the average costs in QuickBooks Desktop. You may want to upgrade to the Enterprise version so you can use the FIFO features instead so the inventory won't calculate using the average cost method.
Read through this article for more insights about the average costing and the FIFO method in QuickBooks Desktop: Average Costing vs FIFO. It also helps you learn about how each method analyzes inventory costs.
Feel free to message again if you have additional questions. We're always delighted to assist.