Landed cost calculations

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A landed cost calculation returns purchase order products with their total costs, including prorated landed fees. You can set up a landed cost calculation as soon as a purchase order is created, or at any time before the goods are received.

See more about the landed cost calculation module on our website.

 

Calculation methods

There are three methods available to calculate pro rata costs of items:

1. By value: based on each item's percentage of the total order value in the base currency (all currency amounts are converted using exchange rates).
2. By product weight: based on each item's percentage of the total order weight.
3. By product volume: based on each item's percentage of the total order volume.

For methods 2 & 3 to work effectively, ensure both the weight and volume is defined for each product.

When viewing a landed cost calculation, click Preview items to see the list of products and identify which ones are missing weight or volume details.

 

Calculation ID

A calculation is a record that stores the landed cost bills and fees for one or more purchase orders to be costed.

Once all linked purchase orders have been fully received, the calculation can be posted. When posted, the following updates occur:

• Supplier bills entered in the calculation are created.
• Entered fees are posted.
• Linked purchase orders are posted.
• Product quantities are committed from "Received awaiting bill" into "Inventory on hand" (see below).
• Total fees are distributed across product items based on the chosen calculation method.

 

There are three ways to create a new calculation:

1. Via the landed cost calculations page (Purchases > Landed cost calculations).
2. When viewing a purchase order, click Setup landed costs.
   
3. When receiving a purchase order, click Enter landed costs and bills.
   

 

Purchase order fulfilled awaiting bill

This occurs when a purchase order is fully received but does not generate a bill at the time of receipt.

The system flags the purchase order as fulfilled and places the received quantities into a virtual inwards area rather than directly into inventory on hand. The benefit of this approach is that it ensures accurate landed costs for each product, which in turn gives the correct cost of goods sold (COGS) on every sales invoice.

Here's a standard example of how this process works:

1. Purchase order created: ordered quantities are recognised as Incoming.
   
2. Received the purchase order in full without generating a bill: quantities are shifted from Incoming to "Received awaiting bill". 
   
   Note: if the order is partially received with the "Automatically create a bill after receive" option unticked, it will remain part-fulfilled until received in full before landed cost calculations.
3. Bill created and landed cost calculations posted: quantities are shifted from "Received awaiting bill" to "Inventory on hand".
   
   To do this:
   1. Find the order on the Received awaiting bill page (Purchases > Received awaiting bill).
   2. Click to open the order, then click Create bill.
      
   3. Enter and post supplier bills and fees for landed cost calculations.
   4. If any errors in the received quantities are found, click Undo receive to return the order status to Confirmed, allowing you to receive the order with the correct quantities.
      

When entering supplier bills, you can match the total bill amount by editing the order's line items. To do this:

1. Click the "Edit item prices" icon.
   
2. Check each line item. If the price is wrong, click the sku code to correct it, then save the item.
3. The total order value (in the supplier's currency) is displayed at the top left hand side of the screen.
   

 

Local currency purchase orders

Landed cost calculations can also be configured for purchase orders sourced from local suppliers. For example, freight or shipping component costs can be distributed among the product items.

The process is similar to foreign currency orders, outlined above. However, when receiving a local currency order, the option "Automatically create a bill after receipt" is enabled by default. This provides a faster way to receive and finalise local orders.

If a landed cost calculation is configured for a local order, its bills and fees will be costed at the same time.

Note: if multiple purchase orders are linked to the same calculation, the order can't be received with a bill at the same time. In this case, the "Automatically create a bill after receive" option is unticked. To finalise the order, go to the landed cost calculations page to post it.

Note: the shipping cost field on the purchase order edit page is not the same as landed cost fees, and will not be prorated onto product items.

 

Foreign currency purchase orders

When receiving a foreign currency order, the option "Automatically create a bill after receive" will not be available. These orders are instead placed into "Received awaiting bill" status after they're received.

To finalise the costing, go to the landed cost calculations page to post it. 

Only the pro rata subtotals are used to calculate the landed fees for each product line item.

Non pro rata subtotals are created as separate bills.

Note: supplier bills and fees with the same supplier, date, reference, currency, rate & tax type will be posted and combined into the same bill.

For example:

 

Preview items

This page provides a detailed breakdown of the landed charges and fees calculated for each product line.

The Quantity column can display in three different modes, depending on the status of the purchase orders:

• Qty ordered: shown if no quantity has been received. The qty ordered is used for calculation.
• Qty to be billed: shown if some quantity has been received and is awaiting costing. The qty received is used for calculation.
• Qty remaining: shown if part of the order has been received and is waiting for more stock to arrive. The qty remaining is used for calculation.

For example: