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First-Expired, First-Out (FEFO) Issues The Batch With The Earliest Expiry Date First, While First-In, First-Out (FIFO) Issues The Batch That Arrived First. For Goods With Expiry Dates, FEFO Is The Better Rule Because Stock Received First Does Not Always Expire First.

Take An Example. Batch A Of An Adhesive Arrives On 1 March And Expires On 30 September. Batch B Arrives On 15 March And Expires On 31 July. FIFO Issues Batch A First, And Batch B Passes Its Expiry Date On The Shelf. FEFO Issues Batch B First, And Both Batches Get Used In Time. Differences In Supplier Lots, Manufacturing Dates, And Remaining Shelf Life At Receipt Are Common In Resins, Coatings, Food Ingredients, Chemicals, And Pharmaceutical Inputs, So This Situation Comes Up Often.

Where FEFO Gives An Advantage:

• Fewer Write-offs And Less Waste: Short-dated Batches Leave The Store First, So Less Material Is Scrapped.
• Working Capital Protected: Stock That Would Have Expired Is Converted Into Production Output Or Sales.
• Quality And Compliance: Expired Material Does Not Reach The Shop Floor Or The Customer, Which Supports GMP-based Practice (for Example, 21 CFR 211.87 For Drug Products In The US And Schedule M In India, Where Storage And Issue Controls Are Expected) And FSSAI Requirements On Date Marking For Packaged Food.
• Better Audit Position: Batch-wise Issue Records Show That Expiry Dates Drove Your Issue Decisions.

FIFO Remains A Sound Choice Where Shelf Life Is Long Or Not A Concern, Such As Many Metal Or Plastic Components. Note That FEFO Is An Issue And Picking Rule, Not A Valuation Formula. It Runs Alongside A Permitted Costing Method Such As FIFO Or Weighted Average, Which Is Consistent With Ind AS 2 And IAS 2. To Apply FEFO In Practice, Your System Needs Batch-wise Stock With Expiry Dates And An Alert Or Pick Suggestion Ordered By Earliest Expiry. This Is What Batch And Lot Tracking In Tally Prime Extensions Provides For Indian Manufacturers.

Tracking These Two Events Gives You A Period-wise View Of How Your Vendor Base Is Changing, Which Helps Finance And Purchase Heads Keep Control Of Supplier Data.

• New Suppliers Created In A Period: See How Many Suppliers Were Added In A Week, Month, Or Quarter, And By Which User. This Helps You Catch Unapproved Vendors, Duplicates, And Unusual Spikes.
• Changes To Supplier Master Information: Review Edits To Names, Addresses, Bank Details, GSTIN, And Payment Terms In One Place, And Verify Each Against Supporting Documents Before Payment.
• Month-end And Audit Readiness: CFOs Can Review One Report At Closing, And Auditors Reporting On Internal Financial Controls Under Section 143(3)(i) Of The Companies Act, 2013 Get Evidence Without Extra Preparation.
• MSME Payment Compliance: Section 43B(h) Of The Income Tax Act And Section 15 Of The MSMED Act Set Time Limits For Paying Micro And Small Suppliers. Accurate Supplier Records, Including Udyam Status, Help You Meet Them.

A Supplier Change Tracker Keeps A Dated Log Of Every Edit To A Vendor's Master Record: What Changed, The Old And New Values, Who Made The Change, And When.

Supplier Masters Hold Bank Account Details, GSTIN, PAN, Payment Terms, Addresses, And Credit Limits. An Unlogged Edit To Any Of These Can Lead To Payment To The Wrong Account, Duplicate Vendors, Or Wrong Tax Treatment. Rule 3(1) Of The Companies (Accounts) Rules, 2014 Requires Companies To Use Accounting Software With An Audit Trail Of Changes, And A Dedicated Supplier Master Change Tracker Presents Those Changes In A Form Finance Teams Can Review Directly.

• Internal Controls: Changes Stay Within Approved Processes And Are Tied To A User.
• Audit Trail: Auditors Get A Clear Record Instead Of Relying On Staff Memory.
• Supply Chain Security: A Bank Account Changed Just Before A Large Payment Is Easy To Spot And Reverse.

The Main Inventory Methods Are WAV, FIFO, LIFO, And FEFO. FEFO Is Better Than FIFO For Expiry-sensitive Goods Because Stock Received First Does Not Always Expire First.

• Weighted Average Value (WAV): Each Issue Is Valued At The Average Cost Of Stock On Hand, Updated With Every Purchase. It Smooths Price Swings And Is Simple To Maintain.
• First-In, First-Out (FIFO): The Oldest Received Stock Is Issued And Costed First. Cost Follows The Actual Sequence Of Purchases.
• Last-In, First-Out (LIFO): The Latest Received Stock Is Issued And Costed First. It Is Not Permitted Under Ind AS 2 Or IFRS (IAS 2), So Confirm Your Accounting Framework Before Using It.
• First-Expired, First-Out (FEFO): Stock With The Earliest Expiry Date Is Issued First, Whatever Its Receipt Date.

Batch Expiry Tracking Means Seeing Which Lots Will Expire In The Next 30, 60, Or 90 Days, So Your Team Can Act While The Stock Still Has Value.

Near-expiry Stock Can Be Moved To The Front Of The Production Plan, Discounted, Or Returned To The Supplier. This Cuts Write-offs And Raw Material Waste. Expired Stock Is Cash Already Spent That Cannot Be Recovered, So Early Action Also Protects Working Capital.

It Supports Compliance As Well. Expired Material Must Not Be Issued Or Sold, And Rules Such As FSSAI Labelling Requirements And 21 CFR 211.137 (US FDA Expiration Dating For Drug Products) Expect Controlled Expiry Dating. Advance Alerts Keep You Audit-ready.