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How to manage landed costs on Brightpearl

Landed costs

A while ago we wrote a blog for Brightpearl describing why landed costs are so important.  You can read it again here.

Now we want to tell you about how to actually use the landed costs functionality in Brightpearl and what it means from an accounting perspective.

Landed costs are those costs that are additional to the actual cost price from the supplier but which make up the full cost of getting stock into your warehouse.  This can include things like shipping and import duty which are billed by third parties.

It is important to recognise the full cost of the product in your accounting system to give you an accurate view of your gross margin.  Brightpearl does this by automatically including an uplift to the cost price when carrying out accounting transactions.

Additional product details

Against each product record you will see an additional piece of information – ‘Landed Costs’.  When stock is valued (for example on the inventory summary report or the balance sheet), or when it is shipped and the cost of goods sold is recorded, then the cost price that is used in the calculation includes both the actual supplier cost AND the additional landed cost.

How is the landed cost calculated?

The invoices (or estimates if you have no invoices) are allocated to stock items on one or more purchase orders using a selection of methods – by weight, by volume, by quantity or by value.  You can choose which suits your business best.

Then once you the book the stock in, the products are allocated their landed cost value.  At this point, the stock value is increased accordingly and the value of the landed cost is held in a new balance sheet code called ‘Landed Cost’ (normally nominal code 2070).  You can also allocate landed costs to stock after it has been booked in, as long as none of it has yet been sold.

What happens to the landed cost invoices?

Although the additional costs have now been included in the stock valuation, you still need to actually record the invoices from the third parties and make sure they are paid as with any other supplier invoice – you just need to make sure that the cost isn’t double counted.

To do this, when you enter an invoice for a landed cost, you must record the invoice against the ‘2070 Landed Cost’ code rather than against the normal shipping or import duty code.  This ensures that you don’t double count costs.

The ‘2070 Landed Cost’ code should also be checked periodically to ensure that everything has been dealt with properly.  If all the costs have been allocated and all the invoices recorded, then you should see the balance in this account come back to zero – any other value will mean that something has been missed and needs to be tracked down.

Need further help with landed costs?  Contact us here – we’d love to help!

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