Apply additional (landing) costs
Overview
An additional landing cost (or additional cost) is a cost associated with purchasing goods or transferring goods between branches, such as freight, insurance, and customs duties. Additional costs must be applied to purchase orders so you know the real landed cost of every unit. They’re paid to third-parties, not your suppliers.
Alternatively, additional costs can be applied by linked transactions. Never apply both additional costs and linked transactions to the same purchase order.
Find out how to add, edit, and delete additional costs.
Shipping costs, port and customs duties, insurance and compliance: you pay many additional landing costs (or additional costs) as a product seller buying inventory.
To work out your final landed costs and price your products competitively, it’s essential you apply additional costs to purchase orders and branch transfers and distribute them equitably. When your additional costs change, you must edit or delete them, too.
After applying or editing an additional cost, you must sync it with your accounting software where it’s credited to an expense account and debited to your inventory; if you delete the additional cost, you must then void the transaction in your accounting software.
Additional costs, which are added under Landed Costs on a purchase order, are paid to third-parties, unlike Freight and Surcharge costs which are paid to your supplier.
Never include tax in an additional cost. Never apply additional costs and linked transactions to the same purchase order either.
Apply, edit, or delete additional (landing) costs
Apply additional costs in your local currency and without tax directly to a purchase order or branch transfer:
Log in to Cin7 Omni.
From the Purchases menu in the navigation, open Purchase Orders (or, from the Stock menu in the navigation, open Branch Transfers).
Open the transaction.
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Each row under the section Landed Costs represents a separate additional cost. Either
to add an additional cost, find an empty row and set the Account, the Amt (without tax), and any Comments (if there’s no emptyrow, first select Add a New Landed Cost),
to edit an additional cost, edit its Amt, or
to delete an additional cost, select X next to it.
Select Save.
After applying or editing an additional cost, you must sync the additional cost with your accounting software. Find out how to sync additional costs to Xero or sync additional costs to QuickBooks Online.
After deleting an additional cost you’ve already synced, you must void the transaction in your accounting software. Find out how to void transactions in Xero or void transactions in QuickBooks Online.
Additional (landing) cost journal entries
When you sync additional costs to your accounting software, a journal entry (QuickBooks Online) or manual journal (Xero) is created.
That entry debits your current asset account for inventory (that is, the Stock on hand account in your accounting integration settings) and credits an expense account.
In order to credit each additional cost to the right expense account, use your Xero or QuickBooks Online integration’s dashboard to set up additional (landing) cost categories. The categories you’ve set up are available in the Account dropdown menu of additional costs on purchase orders and branch transfers.
Distribute additional (landing) costs
To choose how additional costs are distributed to units in a transaction, use the Calculate Freight / Other Landed Costs dropdown menu under Landed Costs:
Distribute by Value: Additional costs are distributed proportionally by unit cost. Use this method if the weight and volume of products in a transaction are similar.
Distribute by Weight: Additional costs are distributed proportionally by unit weight. Use this method if the weight of products in a transaction vary substantially.
Distribute by Cubic Meters: Additional costs are distributed proportionally by unit volume. Use this method if the volume of products in a transaction vary substantially.
For example, say you have a purchase order with two line items:
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Leather shoes
12 units
18 kg (1.5 kg per unit)
0.132 m3 (0.011 m3 per unit)
$1200 subtotal ($100 per unit)
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Linen shirt
25 units
2.5 kg (0.1 kg per unit)
0.025 m3 (0.001 m3 per unit)
$3000 subtotal ($120 per unit)
In total, that’s $4200, 20.5 kg, and 0.157 m3. An additional cost of $50 for freight would be distributed by each method (per unit) as follows:
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By Value
Leather shoes: (50 x (1200 / 4200)) / 12 = $1.2
Linen shirt: (50 x (3000 / 4200)) / 25 = $1.4
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By Weight
Leather shoes: (50 x (18 / 20.5)) / 12 = $3.7
Linen shirt: (50 x (2.5 / 20.5)) / 25 = $0.2
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By Cubic Meters
Leather shoes: (50 x (0.132 / 0.157)) / 12 = $3.5
Linen shirt: (50 x (0.025 / 0.157)) / 25 = $0.3
Customs duties
Customs duties are additional costs that are distributed by the implied customs duty rates of products in a purchase order or branch transfer.
For example, say that in the purchase order above the products’ defined customs duty rates are 5% for leather shoes and 10% for linen shirts. Those rates imply absolute customs duties of $60 for leather shoes (0.05 x 1200 = 60), $300 for linen shirts (0.1 x 3000 = 300), and $360 total for that purchase order.
Therefore, the implied customs duty rates are 17% for leather shoes (60 / 360 = 0.166) and 83% for linen shirts (300 / 360 = 0.833). When you apply an additional cost for customs duties, 17% is distributed equally to units or leather shoes and 83% to units of linen shirts, regardless of whether the real customs duties come in at $360.
Customs duties are only distributed to line items with defined customs duty rates; if none of the line items in a purchase order have a defined customs duty rate, then the customs duties are distributed by value to all products.
FAQs
Can I distribute additional costs by imperial units of measurement?
Yes. If you’ve defined the weights and dimensions of products in imperial units of measurement and selected either Weight or Cubic Meters to distribute additional costs, the additional costs will be distributed according to the imperial measurements; nothing’s converted.
Can I review how additional costs have been distributed in a purchase order?
Yes. Look at the Purchase Order Report for a breakdown of all costs in a purchase order.