What is meant by Landed Cost?? In general any cost incurred in addition to value paid to vendor to procure the item is a landed cost. Examples are shipping and handling, customs, and excise.
The What of Landed Cost
Landed cost is not that big an issue while dealing with vendors who charge a consolidated value to leave the goods at your door. Life would be too easy if it were that simple, wouldn’t it? We ask vendors to charge our account with a carrier when shipping because we have negotiated better rates with the freight carrier. Vendors do not have control over import duties such as customs and excise. So we need to find handling agencies that take care of paper work and get the goods out of the yard. Or we pay the government and handle it ourselves.
The Why of Landed Cost
Guess what, all these are additional costs paid on top of the bill paid to vendor for the item. We need to add all these up to get the true cost of inventory, so we can get to know the real margin. Some businesses simply expense out the cost because they don’t have the facility in their system and it is too much overhead for them to track it manually. Well, Dynamics GP customers can use the Landed Cost module to track landed cost with ease.
Dynamics GP provides true ability to handle third party landed costs
So if your Vendor charged your UPS account for the freight, log an approximate value of freight in landed cost onthe purchase receipt. When you receive the freight bill from UPS
- Match the UPS invoice to the landed cost recorded on shipment from Vendor. The variance between the approximate value and this actual value can be applied to inventory or recorded in a Purchase Price Variance account.
- GP provides ability to record the third party vendor landed cost invoice, match it to actual landed cost and update variance to inventory or to a variance account.
Oh, what did you say, the UPS invoice has several lines each pointing to shipments for multiple items or multiple shipments for the same item. Don’t worry, Dynamics GP provides ability to record a third party vendor invoice and match each line to different shipments.
Other real time applications of landed cost are adding the freight cost when moving items between warehouses.
Have you ever had to move goods from one warehouse to another? What happened to the cost incurred in moving stuff from one warehouse to another? Use the landed cost feature the ‘In Transit Transfer’ window. This is a very useful feature, especially when you want to obtain the true cost for an item in the warehouse.
Nice to haves:
It would be nice to get a feature similar to landed cost in SOP module, so we can record an approximate freight charge. When we get a real invoice from a carrier, we can either charge the excess or return the balance by way of a credit memo or debit memo.
This post is written by Raja S L N. Raja is a Manager in the Microsoft Dynamics GP Practice at Ignify. Ignify is a Global Microsoft Dynamics Inner Circle Partner specializing in Microsoft Dynamics ERP for RetailDistribution, Manufacturing and Chemicals verticals. For help on Microsoft Dynamics ERP email us at dynamics@ignify.com
by Ignify, a Northern California Microsoft Dynamics GP Partner
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