Costing is one of the most important parts of real estate development. Developers must know the exact cost of materials used on each unit, each phase and each project. Without accurate costing, budgets fail, reports become unreliable and profits are difficult to measure.

This is why many developers now use the FIFO costing method. FIFO means First In, First Out. It is the process of using the oldest received stock first before any newer stock is used. Modern tools such as real estate development software, property development software, residential development software, residential land development software and full ERP for real estate developers make FIFO automatic and accurate.

Below is why FIFO is the most reliable method for costing in real estate and construction.

1. FIFO shows the real cost of materials

FIFO uses the exact cost of the batch that was received first.
If you bought cement at 630 shillings last week and 650 shillings this week, FIFO ensures the 630 batch is issued first.
This gives a true and fair picture of material usage and prevents overvaluation or undervaluation.

With software for real estate developers, this process is automatic.

2. FIFO prevents stock manipulation

When pricing is done manually, workers can choose lower or higher prices to hide fraud or mistakes.
FIFO removes manipulation because the system decides the cost based on the earliest batch received.
Nobody can choose a random price.

Real estate development software locks costing to real batches.

3. FIFO improves budget accuracy

When developers use random costing, budgets become unpredictable.
FIFO links all issues to real purchase prices, which helps developers plan better for future phases and future projects.

Accurate costing means better forecasting.

4. FIFO matches real store movement

In real sites, older materials must be used first to avoid expiry, damage or loss.
FIFO follows the same principle, making it practical and realistic for:

Cement
Steel
Timber
Tiles
Pipes
Cables

This protects materials and ensures the store is organised.

5. FIFO simplifies reporting

With FIFO, reports become clearer.
Developers can see exactly which batch was used on each unit and what the actual cost of that batch was.
This makes reporting to directors, investors and auditors easy.

Property development software provides automatic FIFO reports with no manual work.

6. FIFO helps prevent supplier overpricing

When suppliers increase prices too quickly, FIFO makes it easy to detect unusual increases.
Developers can see cost differences between old and new batches instantly.
The system highlights suspicious price jumps.

This protects project finances.

7. FIFO reduces losses during returns

Sometimes materials are returned from the site to the store.
FIFO ensures that returns go back into the system at the correct batch cost.
This keeps the store balances accurate and prevents loss when reissuing those materials.

Real estate development project management software handles this fully.

8. FIFO is easy for site teams to understand

Compared to average costing or other complicated methods, FIFO is simple.
Everyone understands that the oldest materials should be used first.
This makes training easier and reduces errors.

9. FIFO works perfectly with digital systems

Manual FIFO is difficult. You must track batches, dates, prices and quantities manually.
Digital tools like real estate development software automate everything.
The system picks the correct batch and calculates the cost automatically.

This removes all human error.

Conclusion

FIFO is the best costing method for real estate and construction because it is simple, transparent, accurate and fair. It matches real store movement, prevents manipulation, improves budgeting and makes reporting easy. When combined with tools like real estate development software, property development software, residential development software, residential land development software, software for real estate developers and full ERP for real estate developers, FIFO becomes fully automatic and extremely reliable. Paired with the best CRM for real estate developers, the entire development process becomes easier to manage and more profitable.

Digee Technologies provides some of the best software for real estate developers, with built-in FIFO costing for precise material tracking and accurate project budgets.