What does Landed Cost mean for your Bottom Line?

Tuesday, August 15, 2017

For companies involved in importing, the cost of freight and duty on items purchased overseas can be quite significant. In developing a fully realized product cost to maintain profit margins, their accounting department must capture every cost of doing business associated with each product.

Freight and duty are such expenditures that must be rolled into the core item cost so values such as cost of sales are reflected accordingly. Processing this manually means extra work for your back-office. Automating these calculations is much preferred, much simpler, and delivers a much more accurate “landed cost” for your business.

What is Landed Cost?

Landed cost is the total price of a product or shipment once it has arrived at a buyer's doorstep.

The landed cost includes the original price of the product, transportation fees (both inland and ocean), customs, duties, taxes, tariffs, insurance, currency conversion, crating, handling and payment fees. All of these individual costs are part of the value of the received goods. Tracking the overall item cost helps establish proper sales prices and determine the actual margin per item.

Even third-party freight or an import voucher that is received subsequent to a purchase item voucher should be retroactively applied back to the item cost.

Why is Landed Cost Important?

Automating landed cost calculations is essential in today’s global economy. No accounting department has time to perform the manual calculations, and no business owner wants to lose on profits.

If your business is involved in international trade, importing goods from other countries should enhance your profitability, not hurt it. It’s critical to get landed cost right if you want to engage in global trade; no one wants to lose customers (due to estimating costs too high) or earnings (estimating costs too low).

The good news is that xTuple’s business software technology continues to open up global markets for growing companies, especially eCommerce retailers relying on foreign goods.

More on xTuple ERP version 4.11.0 Landed Cost handling at xTuple University.

Dave Anderson

Senior Engineer
Open Source technologist with a focus on the application of open source in business. In particular I have experience implementing xTuple ERP, Pentaho Business Intelligence and Data Integration, and web-based applications using the LAMP and Java platforms. Specific experience experience in the installation, implementation and configuration of the xTuple ERP system. I am the primary developer behind the Fixed Asset extension package for the xTuple ERP system which now includes modules for Depreciation and Maintenance. Specialties: xTuple ERP Implementation, Configuration, and Development. Based in New Zealand.