Introduction to Adjustments
Learn how stock is managed and calculated in Craftybase
This article will guide you through how Adjustments affect stock in Craftybase.
Adjustments are the backbone of how Craftybase tracks your stock levels and calculates your inventory costs. Every increase or decrease in stock is recorded as an adjustment, giving you a complete and auditable history of your inventory.
In this tutorial, we'll cover:
- What are Adjustments?
- Materials & Product Adjustments
- How Craftybase Calculates Costs
- How to find your adjustment history
- Manual Adjustments
- Adjustments Categories
- Best Practices
This tutorial should take approximately 15 minutes to complete.
What are Adjustments?
Craftybase is perpetual inventory software, which means your stock levels and inventory value are updated constantly and in real time. This is different to periodic systems (like spreadsheets or accounting programs) that only update stock when you do a stocktake.
In a perpetual system, every stock change is an adjustment:
- An increase in stock is a positive adjustment.
- A decrease in stock is a negative adjustment.
Most adjustments are created automatically by Craftybase based on your actions - you’ll rarely need to add them manually.
Materials & Product Adjustments
Craftybase creates both Material Adjustments and Product Adjustments depending on what action you take. These adjustments ensure every item used, purchased, made, or sold is fully tracked.
Material Adjustments
A Material Adjustment is automatically created when you:
- Log an expense or purchase for a material
- Create a manufacture for a product that uses that material
Example: You purchase 10 lbs of shea butter for $100. This creates a positive material adjustment that increases your material stock and sets the unit cost. Later, you manufacture 20 bars of soap using 2 lbs of shea butter. Craftybase records a negative adjustment for the material to reduce your inventory accordingly.
Product Adjustments
A Product Adjustment is automatically created when you:
- Create a manufacture to add stock of a finished product.
- Enter a customer order that removes product stock.
Example: You manufacture 20 Lavender Soap Bars. Craftybase creates a positive product adjustment to reflect the new stock. When 3 bars are sold through your connected Etsy store, Craftybase creates a negative product adjustment, automatically removing them from your inventory.
How Craftybase Calculates Costs
Craftybase uses Weighted Average Cost (WAC) - also called rolling or moving average - to calculate all inventory values and COGS. This is an accepted GAAP and IRS method of accounting for inventory and is the one most commonly used in manufacturing situations, as it effectively allows for the "pooling" of materials.
Every time stock levels change, Craftybase recalculates the average unit cost based on:
- Total inventory value
- Total units on hand at that moment
The entire calculation relies on your adjustment history. If a key adjustment is missing or incorrect, your costs may not calculate as expected.
Example:
-
You enter a purchase for 10lbs of Shea Butter at $10/lb
Total Inventory Value = $100
Units = 10
-
At a later date, you enter a purchase for another 10lbs at $15/lb
Total Inventory Value = $250
Units = 20
-
Craftybase will then recalculate the new average unit cost
(Total Inventory Value) ÷ (Units) = Average Unit Cost
250 ÷ 20 = 12.50
Unit Cost = $12.50
From then on, any soap bars made with Shea Butter are costed at $12.50 per lb until another purchase changes the average.
How to find the adjustment history
To view your Adjustment history:
- Navigate to your Material, Product, or Variation page
-
Click the Adjustments tab.
Adjustments History
Here you'll see a list of all stock changes with the associated fields:
- Adjustment Date: The date the stock change was recorded
- Reason: The action that triggered the adjustment
- Name: The Material, Product or Variation the adjustment applies to
- Qty: The quantity entered for the adjustment itself - the amount added or removed during that action.
- Change: Shows how much the stock levels changed
- Status: Indicates whether there was enough stock on hand at the time of the adjustment (Green = enough stock, Red = stock was zero or negative)
- Unit Cost: The calculated cost per unit at the moment the adjustment occurred, based on your weighted average cost
Most costing issues are caused by a missing adjustment — for example, a manufacture wasn’t added on the day you made stock, so later orders can’t be costed correctly. In other cases, costing problems may come from an incorrectly entered purchase cost.
Manual Adjustments
While most material and product adjustments are created automatically by Craftybase through purchases, manufactures, and orders, there are situations where you may need to create a manual adjustment to ensure your inventory records stay accurate.
When to Use Manual Adjustments:
- Correcting stock discrepancies
- Recording samples or donations
- Accounting for damaged or lost stock
- Setting up initial inventory
Manual Adjustments should only be used when you need to directly update stock levels without a corresponding transaction, such as a purchase, manufacture, or order.
Frequent manual adjustments make it harder to trace cost accuracy. Always use the correct workflow when possible.
Adjustment Categories
When creating manual adjustments in Craftybase, you’ll have the option to assign a category to help track the reason for the adjustment.
These categories help you:
- Track non-standard stock movement
- Identify trends (breakage, waste, donations)
- Prepare tax-related reports such as the Schedule C.
Default Category: Personal Use
Craftybase includes a default adjustment category called Personal Use. This category is used to indicate any inventory - either materials or products - that has been withdrawn from your business for non-business purposes.
The “Personal Use” category is directly tied to how your Schedule C report is calculated in Craftybase.
Custom Categories
You can create your own adjustment categories to better track other types of inventory changes, such as:
- Lost or Damaged
- Donated
- Promotional Samples
- Internal Testing
- Theft or Shrinkage
- Market Display Items
Custom categories don’t affect Schedule C unless used for personal withdrawals.
Best Practices for Accurate Inventory
- Record every purchase, manufacture, and sale promptly
- Avoid using manual adjustments unless absolutely necessary
- Review your Adjustment tab regularly
- Check for red clipboards - they indicate stock shortages
- Ensure purchase costs are entered correctly
- Keep starting adjustments accurate and up to date
Small corrections made early can prevent larger costing issues later.
Wrap-Up
That’s it! You now have a solid understanding of how Adjustments work in Craftybase and how they impact your stock levels and costing.
Next, you can:
- Review your existing material and product adjustments
- Check for any missing manufactures or purchases
- Set up adjustment categories to better track stock movement
Want to Learn More?
Check out these related resources to keep things running smoothly: