What is FIFO?

Put new deliveries behind older stock, so customers take the older items first. This matters most for goods that go stale, fade or get superseded, such as snacks, cosmetics and seasonal packs. It is a habit, not a calculation.

Prices from suppliers change, so two batches of the same product often cost different amounts. FIFO assumes you sell the oldest batch first, and costs the sale at that batch's price.

A shop buys 20 bags of flour at $2.00, then a week later 20 more at $2.40. It sells 25 bags.

• First 20 bags at $2.00 = $40
• Next 5 bags at $2.40 = $12
• Cost of the 25 bags sold: $52
• Remaining 15 bags at $2.40 = $36 of stock

With an average cost instead, every bag counts as ($40 + $48) / 40 = $2.20. The 25 bags sold then cost $55, and the 15 left are valued at $33. The totals are the same ($88), only the split differs. When prices are rising, FIFO shows a lower cost of sales and a higher profit than average cost does.

Whatever you can keep up consistently. FIFO needs you to track each batch's price, which is more work. Many small shops use a single current or average cost per product and rotate the shelf by habit. What matters is picking one method and keeping it. See inventory valuation and the guide to inventory valuation methods for the comparison.

Shopkeepa does not track expiry dates or batches, so shelf rotation is up to your staff. When you record a delivery with Stock In, make putting new stock behind old a standard step.