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We are beginning the planning stages of implementing landed cost in GP. I have a ton of questions about this and really what is the best way to start.
I've been doing a bunch of testing in a test company setting it up and I think I understand how to do the initial setup for our company.
Some of our items are not charged any duty, but our forwarder charges us a small fee. If that is the case, would there have to be a separate landed cost group or item set up and assigned to that item?
Sometimes, we don't use our freight forwarders and use UPS or FedEx. Would this also be another landed cost group that would be assigned at the PO level instead of the item level?
When the items are received in our warehouse, GP will accrue the landed costs based on the group ID, correct? Right now in our manual way, these costs are getting put into COGS. When landed cost does it, will it sit in the accrued purchases account or should it go somewhere else?
Many times, our forwarder invoices don't arrive until after the items have already been sold. Does this cause any issues in GP or when landed cost revalues inventory?
Lastly, how do I handle the existing items in inventory? Do I add the costs to the items? Do I leave them alone?
A lot , I know. Thank you in advance for any assistance.
-Joe
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Hi Dan-
I think I understand most of your answer, but I have some more questions now:
"Assuming you are using actual based on your revalue comments, I have generally done the percentage (estimated freight) on all items just to add cost to it, with the offsetting account an account such as freight in."
So when the item is received, the percentage gets added to the receipt layer based on the landed cost group used on the PO? So, for example, if we received something that used our forwarder, basically the costs are 7%. If we use UPS or FedEx, the costs are much more. Do we have to figure out how much more so we can make a landed cost group for that situation?
What I don't understand is the offsetting account part -- if the freight and duty costs are more or less than what landed cost added to it at posting, how does that get reflected? Or since we know we are close, is that is OK because any difference is showing in the Freight In account?
I like the idea of an accrued purchases account for LC. In my test company, I set that up. When the AP person is entering the invoice for freight/duty/whatever, the accrued purchase account would get debited and the freight in account would get credited?
Thank you.
-Joe
I heartily agree with Dan on this. The amount of transactional overhead with matching actual landed costs to previously posted invoices is seldom cost-effective. Almost all my clients who use landed cost utilize it as Dan describes.
Good luck,
hi Joe,
It looks like you may have an answer to your questions.
I did have a few comments to add.
Q: Right now in our manual way, these costs are getting put into COGS. When landed cost does it, will it sit in the accrued purchases account or should it go somewhere else?
** There is a setting you can choose how you want these costs to be handled. At Cards> inventory> landed costs: Revalue inventory for Cost variance. If marked, the inventory value of the item will be updated to include the landed cost amounts (you can see inventory values at inquiry> inventory> receipts). This will also go to the inventory and/or cogs account if sold.
If not marked, would use accrued purchases and would not update the inventory cost layer.
Accounts used during the invoicing process will also be different if Invoice Match is marked or unmarked.
Q: Many times, our forwarder invoices don't arrive until after the items have already been sold. Does this cause any issues in GP or when landed cost revalues inventory?
**The sytem should automatically account for the adjustment to COGS
Q: Lastly, how do I handle the existing items in inventory? Do I add the costs to the items? Do I leave them alone?
** You could add amounts to existing inventory layers if you wish to do so at Tools >utilities> inventory> adjust costs
I hope this helps, If you have a specific example or follow up questions, please let me know.
Assuming you are using actual based on your revalue comments, I have generally done the percentage (estimated freight) on all items just to add cost to it, with the offsetting account an account such as freight in. It reduces data entry and is simple since the AP person only needs to hit the freight in account and not have to worry about matching. Almost all of my instances are smaller percentages where freight was the primary cost added and it was simple to manage and implement. The people doing the receiving of the product also have to assign the LC groups or ID's so that is another reason I went KISS (keep it simple) on it.
With regard to your question on the freight forwarders, I would create different groups (a group for every situtation and each group with different LC ID's). Keep in mind the cost/benefit of the process so you do not create 3 trx to capture $5 of additional cost. You might also create a second accrued purchasing account (1 - items, 1 - LC) to ease in reconciliation. I don not have a lot of experience with the matching of LC invoices for the very questions you are raising as I, as well as my customers, have been happy with the method above. We are 99% accurate with little effort, as opposed to 100% accurate with a lot of effort.
Does this help out?
Dan Liebl, CMA CPIM | Senior Consultant | OTT,Inc | DLiebl@OTT-inc.com
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