Why "Average Cost Period: Day" is the Least Accurate Choice in Business Central

Why "Average Cost Period: Day" is the Least Accurate Choice in Business Central

In Microsoft Dynamics 365 Business Central, choosing the right Average Cost Period is the difference between clean margins and a financial headache. While "Day" might sound like it offers the most precision, it is actually the most prone to error due to the "Invoicing Lag."

The "Invoicing Lag" Trap

In the real world, physical goods move faster than paperwork. This creates a timing gap that the "By Day" setting cannot bridge.

The Example:

• Monday (Day 1): You post a Purchase Receipt for a widget with an expected cost of $5. You then post a Sales Shipment to a customer. Business Central records the COGS at $5.

• Wednesday (Day 3): The vendor invoice arrives, and it’s higher than expected. You post the Purchase Invoice at the actual cost of $15.

Why "By Day" Fails

If your period is set to Day, Business Central treats Monday and Wednesday as isolated silos. Because the sale happened on Monday and the final cost wasn't known until Wednesday, the system often fails to "reach back" across those 48 hours to update the original sale. You end up with a $5 COGS on Monday that never gets adjusted, leaving $10 of "ghost value" sitting in your inventory ledger.

The "By Day" setting assumes your business cycle starts and ends every 24 hours. In reality, business spans days and weeks. Stick to "Month" to ensure your costs are smoothed out and your margins reflect the true price you paid—not just the date you posted the paperwork.