Cost Engine Overview

Understanding how NetSuite's cost engine calculates and recalculates inventory costs.

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How the Cost Engine Works

NETSUITE COST ENGINE OVERVIEW
═══════════════════════════════════════════════════════════════════════════════

                         TRANSACTION SAVED
                               │
                               ▼
                    ┌─────────────────────┐
                    │  Has Inventory      │
                    │  Costing Impact?    │
                    └──────────┬──────────┘
                               │
                    ┌──────────┴──────────┐
                    │                     │
                   YES                    NO
                    │                     │
                    ▼                     ▼
         ┌─────────────────┐        No action
         │ Item flagged as │
         │ "In Queue"      │
         └────────┬────────┘
                  │
                  ▼
    ┌─────────────────────────────┐
    │     COSTING PREFERENCE      │
    │                             │
    │  ┌───────────────────────┐  │
    │  │ After Transaction     │──┼──▶ Process IMMEDIATELY
    │  └───────────────────────┘  │
    │                             │
    │  ┌───────────────────────┐  │
    │  │ Every Hour            │──┼──▶ Process in BATCH (hourly)
    │  └───────────────────────┘  │
    │                             │
    └─────────────────────────────┘
                  │
                  ▼
         ┌─────────────────┐
         │ Status changes  │
         │ to "In Process" │
         └────────┬────────┘
                  │
                  ▼
         ┌─────────────────┐
         │ Recalculates    │
         │ affected items  │
         └────────┬────────┘
                  │
                  ▼
         ┌─────────────────┐
         │ Updates GL on   │
         │ affected trans  │
         └────────┬────────┘
                  │
                  ▼
         ┌─────────────────┐
         │ Status changes  │
         │ to "Completed"  │
         └─────────────────┘

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Costing Preferences Setup

Navigate to: Setup > Accounting > Inventory Costing Preferences

Scheduling Options

Option	Behavior	Best For
After transaction entry	Immediate processing after save	Low volume, real-time accuracy needed
Every hour	Batched processing once per hour	High volume, better performance

Hourly Processing Explained

HOURLY COSTING CYCLE
═══════════════════════════════════════════════════════════════════════════════

HOUR 1 (9:00 AM - 10:00 AM):
  9:05 AM ──▶ Item Receipt saved (Item X flagged "In Queue")
  9:15 AM ──▶ Invoice saved (Item X already queued)
  9:30 AM ──▶ Adjustment saved (Item Y flagged "In Queue")
  9:45 AM ──▶ Cash Sale saved (Item X already queued)

10:00 AM ──▶ COST ENGINE RUNS
             │
             ├── Collects all "In Queue" items
             ├── Processes in chronological order
             ├── Recalculates costs
             ├── Updates GL entries on affected transactions
             └── Sets status to "Completed"

HOUR 2 (10:00 AM - 11:00 AM):
  10:05 AM ──▶ New transactions...

11:00 AM ──▶ COST ENGINE RUNS AGAIN

Additional Settings

Setting	Description
Latest Custom Schedule End Time	Latest time to start costing process
Respect Inventory Costing Time Restrictions on Weekends	Skip weekend processing
Use Cost Estimate for Negative Inventory	How to handle negative inventory cost (Last Purchase Price, Average Cost, or Zero)

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Cost Accounting Status Field

The Cost Accounting Status field shows where an item is in the costing process.

How to View It

1. Go to Item Record
2. Click Customize Form
3. Find and unhide Cost Accounting Status field
4. Check under Purchasing/Inventory > Location subtab

Status Values

Status	Meaning	Action
Blank	Cost accounting never run for this item	Normal for new items
In Queue	Flagged for processing, waiting to start	Wait for next cycle
Pending	(Lot/Serial items) Flagged, waiting to start	Wait for next cycle
In Process	Calculations currently running	Do not edit item
Completed	Processing finished	Normal state
Error	Calculation failed	Investigate issue

Quick Check Method

CHECK IF COSTING IS RUNNING
═══════════════════════════════════════════════════════════════════════════════

Method 1: Income Statement
  Go to: Reports > Financial > Income Statement
  Click: Display Title
  Look at bottom of title for message:
  "Cost calculation is running..."

Method 2: Period Close
  When closing period, popup will warn if costing still running

Method 3: Item Record
  Check Cost Accounting Status field on affected items

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Processing Order Rules

NetSuite Processing Priority

Within the same day, NetSuite processes transactions in this order:

SAME-DAY PROCESSING ORDER
═══════════════════════════════════════════════════════════════════════════════

  1. INCREASES first (receipts, positive adjustments)
     ↓
  2. DECREASES second (sales, negative adjustments)

EXAMPLE - All on Same Day:

  Transaction A: Sale -50 units ──────────────┐
  Transaction B: Receipt +100 units ──────────┼── Same day
  Transaction C: Adjustment -30 units ────────┘

  Processing Order:
    1. Transaction B (+100) ← Processed first
    2. Transaction A (-50)  ← Processed second
    3. Transaction C (-30)  ← Processed third

  Result: Prevents negative inventory from occurring

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Cost Engine Topics

Topic	Description
Recalculation Triggers	What transactions trigger cost recalculation
GL Impact Changes	Which GL entries change after recalculation
Backdated Transactions	Impact of backdating on costing

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Next Steps

• Recalculation Triggers - What triggers recalculation
• GL Impact Changes - Which transactions have GL changes
• Backdated Transactions - Backdating impact