Understanding the Fundamentals
Before exploring Odoo's transformation, let's clarify the key accounting concepts that govern inventory valuation.
Accounting Philosophies: Continental vs Anglo-Saxon
These are not valuation methods but rather accounting philosophies that determine WHEN inventory costs impact your profit and loss statement.
Continental Accounting (European approach):
- Purchases are immediately recorded as expenses
- Inventory is an adjustment made at period end
- Used primarily in continental Europe, France, Belgium, and Germany
Anglo-Saxon Accounting (UK/US approach):
- Purchases increase inventory (asset account)
- Expenses are recognized only when goods are sold (Cost of Goods Sold)
- Standard in UK, US, Australia, other English-speaking countries like New Zealand, Ireland, Canada, and most trading companies in the Middle East.
Valuation Timing Methods: Periodic vs Perpetual
These determine WHEN inventory values are updated in your accounting books.
Periodic Valuation:
- Inventory values updated manually at period end
- Requires physical counts and manual adjustments
- Simpler but provides less visibility during the period
Perpetual Valuation:
- Inventory values updated automatically with each transaction
- Provides real-time inventory value visibility
- More complex but more accurate and timely
The Evolution: Before and After Odoo version 19
Before Odoo 19: The Layered Approach
The system created a "valuation layer" for every single inventory movement. Think of it like keeping a detailed receipt for every item that moved in or out of your warehouse. While comprehensive, this created thousands of records for busy operations, making the system slow and complex.
Problems with the Old System:
- Performance degradation with high-volume transactions
- Difficult reconciliation when discrepancies arose
- Complex backdating and correction processes
- Large database storage requirements
Odoo 19: The Streamlined Solution
The new system eliminates the intermediate layer entirely. Values are now stored directly with the inventory movements themselves, like writing the price directly on the box instead of keeping separate price tags.
Benefits of the New Approach:
- Faster performance, especially for high-volume operations
- Simpler reconciliation between inventory and accounting
- Clearer tracking of manual adjustments
- Reduced database storage requirements
Practical Examples: Before and After Odoo 19
Let's examine how the same scenarios work before and after the changes.
Scenario 1: Continental + Periodic Valuation
Company Profile: A French retailer using traditional European accounting
Transaction Flow
- Purchase: 10 units at €50 each = €500
- Sale: 6 units at €100 each = €600
- Remaining: 4 units valued at €200
Before Odoo 19
At Purchase:
Account | Debit | Credit |
Purchase Expense | €500 | |
Accounts Payable | €500 |
System creates valuation layers in background (not posted)
At Sale:
Account | Debit | Credit |
Accounts Receivable | €600 | |
Sales Revenue | €600 |
More valuation layers created but not posted
Month-End Closing:
Account | Debit | Credit |
Inventory Asset | €200 | |
Inventory Variation | €300 | |
Purchase Expense | €500 |
System had to process all valuation layers to calculate these amounts
After Odoo 19
At Purchase:
Account | Debit | Credit |
Purchase Expense | €500 | |
Accounts Payable | €500 |
Value stored directly on movement
At Sale:
Account | Debit | Credit |
Accounts Receivable | €600 | |
Sales Revenue | €600 |
System calculates value from movement directly
Month-End Closing (Automated):
Account | Debit | Credit |
Inventory Asset | €200 | |
Inventory Variation | €200 |
New closing report automatically generates this entry
Scenario 2: Anglo-Saxon + Perpetual Valuation
Company Profile: An Aussie distributor with real-time inventory tracking
Transaction Flow
- Purchase: 10 units at $50 each = $500
- Sale: 6 units at $100 each (cost $300)
- Remaining: 4 units valued at $200
Before Odoo 19
At Receipt (before invoice):
Account | Debit | Credit |
Stock Interim (Receipt) | $500 | |
Stock Input | $500 |
Valuation layer created with estimated value
At Vendor Bill:
Account | Debit | Credit |
Stock Input | $500 | |
Accounts Payable | $500 | |
Inventory Asset | $500 | |
Stock Interim (Receipt) | $500 |
Multiple valuation layers and reconciliation needed
At Customer Delivery:
Account | Debit | Credit |
Stock Output | $300 | |
Inventory Asset | $300 |
Valuation layers calculate FIFO/AVCO cost
At Customer Invoice:
Account | Debit | Credit |
Accounts Receivable | $600 | |
Sales Revenue | $600 | |
COGS | $300 | |
Stock Output | $300 |
System reconciles through valuation layers
After Odoo 19
At Receipt (before invoice):
No accounting entry - value tracked on movement
At Vendor Bill:
Account | Debit | Credit |
Inventory Asset | $500 | |
Accounts Payable | $500 |
Direct posting, no interim accounts
At Customer Invoice:
Account | Debit | Credit |
Accounts Receivable | $600 | |
Sales Revenue | $600 | |
COGS | $300 | |
Inventory Asset | $300 |
Value pulled directly from movements
The New Closing Process in Odoo v19
Automated Reconciliation
The new Inventory Valuation Audit Report automatically:
- Compares physical inventory value with accounting balances
- Identifies discrepancies between systems
- Generates necessary adjustment entries
- Handles timing differences for goods in transit
Manual Adjustments
When manual value corrections are needed:
- Before Odoo 19: Complex layer adjustments, often requiring technical intervention
- After Odoo 19: Simple value update with clear audit trail showing who, when, and why
Configuration Comparison
Before Odoo 19
- Multiple configuration points across different modules
- Separate settings for input/output accounts
- Complex interim account configurations
- Manual period-end closing processes
After Odoo 19
- Centralized configuration in company settings
- Simplified account structure
- Automated closing options (daily, monthly, or manual)
- Built-in reconciliation tools
Key Differences Summary
Aspect | Before Odoo 19 | After Odoo 19 |
Data Structure | Separate valuation layers for each movement | Values stored directly on movements |
Performance | Slower with high volumes | Optimized for any volume |
Reconciliation | Manual and complex | Automated with audit report |
Corrections | Difficult, often need technical help | Simple with clear audit trail |
Interim Accounts | Required for perpetual valuation | No longer needed |
Closing Process | Manual journal entries | Automated generation |
Storage | Large database footprint | Minimal storage impact |
Business Impact
For Finance Teams
- Less time spent on month-end reconciliation
- Clearer visibility into inventory values
- Simpler corrections when adjustments are needed
- Better compliance with automated audit trails
For Operations
- Faster system response during busy periods
- Real-time accuracy without performance penalty
- Easier troubleshooting of valuation issues
For IT/Implementation Teams
- Simpler architecture to maintain
- Fewer customizations needed
- Easier upgrades in the future
- Reduced database maintenance
Migration Considerations
When upgrading to Odoo 19:
- Historical Data: Previous valuations remain accessible but use the new structure going forward
- Customizations: Any custom reports or processes need updating
- Training: Finance teams need orientation on the new closing process
- Testing: Thoroughly test valuation scenarios before go-live
Conclusion
Odoo version 19's transformation of inventory valuation represents a major simplification without sacrificing functionality. The removal of valuation layers in favor of direct value storage delivers:
- Improved performance that scales with business growth
- Simplified processes that reduce training requirements
- Better accuracy through automated reconciliation
- Enhanced auditability with clearer adjustment tracking
The key takeaway: Odoo 19 achieves the same business outcomes, accurate inventory valuation and proper accounting, through a much simpler and more efficient approach. Whether using Continental or Anglo-Saxon accounting, Periodic or Perpetual valuation, the new system handles all scenarios more elegantly than before.
Need Help with Odoo 19 Migration or Implementation?
Upgrading to Odoo 19's new valuation system can be complex. At ERP Heritage, we've successfully migrated dozens of businesses, ensuring smooth transitions without data loss or operational disruption.
Get expert guidance from Odoo specialists who understand both the technical and accounting implications.
Contact us today for a free consultation or call +61 469 095 910 or info@erpheritage.com.au.