A controller at a metal job shop told us last week that their annual standard costs go stale by March. Steel moved about twenty percent in a year, nobody wanted to reopen the standards mid-year, and the shop just ate the variance. The question underneath was whether moving to Business Central would fix that on its own. It won't, but the way you set up costing can get you a lot closer.
A stale standard is a setup choice, not a system flaw
Standard cost means you set an expected cost per item once, and every transaction posts against that figure. Anything the market does differently shows up as a variance. That's useful when you want to measure manufacturing performance against a plan. It's painful when your raw material price swings and you only reset the standard once a year, because the whole year's difference piles up into one number nobody can explain later.
Business Central doesn't force one costing method on the whole company. You choose a costing method per item, on the item card, and you can mix them. That flexibility is the part most shops in this position don't realize they have.
A common split: average on raw, standard on finished
For a job shop that buys volatile raw material and builds it into finished goods, one pattern shows up often:
- Purchased raw material on average cost, so the cost tracks what you actually paid as the market moves, without an annual revaluation exercise.
- Finished goods on standard cost, where you genuinely want to see a manufacturing variance against a plan.
That way the market-driven price movement on steel flows through as a real cost instead of a year-end surprise, and the variance you do report is the one that tells you something about how the shop ran.
Business Central supports several costing methods per item, including Average, Standard, FIFO, and Specific. The right choice depends on how volatile the item's cost is and whether you want to measure a variance against a plan.
Decide before go-live, not after
You can change an item's costing method later, but it isn't a casual switch. Once an item has posted transactions, changing the method means running a revaluation and having a conversation with your auditors about whether the numbers are comparable across the change. That's a real project on its own.
It's far cheaper to get this right during design. This is why we spend real time on costing when we plan an implementation instead of treating it as a configuration detail to sort out later. The item card decision follows you for years.
Talk it through
If your standards are stale and your material prices move, it's worth mapping which items should carry a variance and which should just track the market before you commit to a design. We're happy to walk through your item list with you and think it through together.