bookkeeping tax
How to Use the Material Valuation Report for Tax Season
Your accountant needs three numbers at tax time: opening inventory, closing inventory, and purchases. Craftybase's Material Valuation report gives you all three, if you know where to look.
Tax season has a way of surfacing the gaps in your record-keeping. A question that appears in our support queue every January, reliably: “My accountant needs my inventory value. Where do I find that in Craftybase?”
The short answer is the Material Valuation report. This post covers what the report actually shows, what your accountant needs from you, and how to read the numbers correctly so you’re not handing over a figure that raises more questions than it answers.
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What does the Material Valuation report show?
The Material Valuation report shows the current value of your raw materials on hand, calculated using weighted average cost (AVCO).
Each material line shows your current stock quantity multiplied by the weighted average unit cost Craftybase has calculated across all your purchases of that material. The total at the bottom is your closing inventory value for raw materials.
If you want to understand how AVCO works in depth, the weighted average costing guide covers it thoroughly. For tax purposes, the key thing to know is that Craftybase recalculates the average cost each time you record a purchase. The figure in your report reflects the true blended cost of everything you have on hand, not just the price from your last order.
What does your accountant actually need?
Most makers assume their accountant needs a single number. In practice, they need three. The relationship between them is what produces your COGS figure for the year.
The formula is:
Opening Inventory + Purchases − Closing Inventory = Cost of Goods Sold
This is the inventory roll-forward calculation your accountant uses to complete your Schedule C or business tax return. For more on how COGS feeds into your tax filing, the Schedule C guide for handmade sellers walks through the whole process.
Here is what each number means and where to find it:
Opening Inventory — the value of your materials on hand at the start of your tax year (1 January, or the first day of your financial year). This is last year’s closing inventory value.
Purchases — the total amount you spent on raw materials during the year. Run the Materials Purchases report filtered to your full tax year.
Closing Inventory — the value of your materials on hand at the end of your tax year. This is what the Material Valuation report shows when you run it as of 31 December.
How to run the Material Valuation report at year-end
Running the report is straightforward. The important thing is the date you use.
- Go to Reports in your Craftybase sidebar
- Select Material Valuation
- Set the date to 31 December of the tax year you’re filing for
- Export to CSV or PDF (your accountant can work with either)
The date matters because Craftybase calculates the valuation as of that point in time. If you run it today and your tax year ended in December, you’ll get today’s figures rather than the year-end figures. Always set the date explicitly.
For opening inventory, either use the closing inventory figure from your previous year-end report, or run the Material Valuation report dated 1 January of the filing year (or 31 December of the prior year; they should be the same number).
How to reconcile with QuickBooks
If you also use QuickBooks and have inventory tracked there, you may notice a discrepancy between what QuickBooks shows as your inventory asset and what Craftybase’s Material Valuation report shows. This is normal, and here is why.
QuickBooks tracks inventory at the product (finished goods) level. Craftybase tracks inventory at the materials level. They are measuring different things.
What to give your accountant: the Craftybase Material Valuation report for raw materials, along with a note that this covers input materials only. Finished goods inventory is a separate figure if you also track that. Your accountant can combine both if needed, or use the materials figure alone if your finished goods inventory is typically near zero at year-end (common for made-to-order businesses).
Why does the number look wrong?
This is the most common source of confusion in support tickets. A few scenarios that can produce a surprising figure:
Materials with no purchase history. If you added a material manually and entered an opening quantity but never recorded a purchase order for it, the cost will be zero. Craftybase can only calculate weighted average cost from actual purchase records. The fix: add a purchase record for the material with the cost you paid, even if the purchase happened before you started using Craftybase.
Unit of measure mismatches. If you purchased 1 litre of fragrance oil but entered it as 1 unit, the per-unit cost looks correct but the quantity is wrong. The valuation will be off by however many ml you track usage in. Check that your purchase units match your usage units for materials measured by weight or volume.
Materials received as samples or gifts. If you received materials for free (supplier samples, gifts from friends), and recorded them at zero cost, they’ll contribute quantity but no cost to the average. This is accurate (you did receive them at zero cost), but it will pull your average cost down slightly. Most accountants are comfortable with this; just be ready to explain if asked.
Purchases recorded under the wrong material. If a purchase is attributed to a slightly different material (for example, “lavender essential oil 10ml” vs “lavender essential oil 30ml” as two separate entries), the valuations will split across both. The fix is to consolidate your material library so each distinct material has one canonical entry.
A note on timing: run this before year-end
The ideal time to check your Material Valuation report is before your financial year closes, not after. If you spot errors (zero-cost materials, unit of measure problems), you still have time to correct the purchase records and get accurate figures before you hand anything to your accountant.
Running a draft valuation in November or early December and reconciling any surprises takes much less time than untangling them in January under tax deadline pressure.
Frequently Asked Questions
What is the Material Valuation report in Craftybase?
The Material Valuation report shows the total value of your raw materials on hand at a given date, calculated using weighted average cost. Each material line shows current stock quantity multiplied by the weighted average unit cost across all recorded purchases. The report total gives you your closing raw materials inventory value for that date: the number your accountant needs for the inventory roll-forward calculation on your tax return.
How does Craftybase calculate the inventory valuation for taxes?
Craftybase uses weighted average cost (AVCO): it recalculates the average cost per unit each time you record a purchase, blending the new purchase price with the existing stock cost. The Material Valuation report multiplies each material's current quantity by its weighted average unit cost to produce a total. This is an accepted inventory costing method for tax purposes; your accountant can use it directly in the COGS roll-forward formula.
What date should I use when running the Material Valuation report for taxes?
Set the report date to 31 December of the tax year you're filing for (or the last day of your financial year, if different). Running the report without setting a date gives you today's value, not the year-end figure your accountant needs. For opening inventory, run the same report dated 1 January of the filing year, or use the closing figure from your previous year's report.
Why does my Material Valuation report show zero cost for some materials?
Zero-cost materials usually mean the material has stock recorded but no purchase history in Craftybase. This happens when you enter an opening quantity manually without a corresponding purchase record. To fix it, add a purchase for the material with the actual cost you paid, even if the purchase predates when you started using Craftybase. Once the purchase is recorded, Craftybase can calculate the weighted average cost correctly.
Can I use the Craftybase Material Valuation report for my Schedule C?
Yes. The Material Valuation report gives you your closing inventory value, which feeds directly into the Schedule C Part III inventory roll-forward: Opening Inventory + Purchases − Closing Inventory = Cost of Goods Sold. Run the report dated 31 December for closing inventory, use the prior year's closing as opening inventory, and pull your total material purchases from the Materials Purchases report for the year. Your accountant can complete the COGS calculation from those three figures.
The makers who get through tax season without a scramble are the ones who check their Material Valuation report before they need it, not the night before a deadline. Running it in November takes five minutes. Chasing down purchase records for materials with zero cost in January takes considerably longer.
