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Dynamics 365 Community / Forums / Microsoft Dynamics GP (Archived) / inventory and freight ...
Microsoft Dynamics GP (Archived)

inventory and freight cost

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Posted on by LisaG 20

Our company has never included freight on our PO's so the cost of the inventory is really incorrect.  All of our incoming inventory is shipped Collect on our UPS/FED EX accounts therefore we do not know what the actual cost of the incoming freight is until we receive our bill and that is sometimes 2 - 3 weeks after receiving & invoicing PO.  What is the best way to handle freight so that the cost of inventory items reflects the "TRUE" cost including freight?

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  • Richard Wheeler Profile Picture
    Richard Wheeler 75,848 Moderator on at

    On the PO Receiving Transaction entry screen near the bottom is the landed cost button. The description of how landed cost works starts on page 193 of the Purchasing User's Guide.

  • Richard Wheeler Profile Picture
    Richard Wheeler 75,848 Moderator on at

    It is actually the Purchase Order Processing Guide.

  • Dan Liebl Profile Picture
    Dan Liebl 7,320 on at

    To add to Richard's comments, I have a question.   What is you valuation method?   Do you use Periodic?   If so, Landed Cost may not work best.    If Perpetual, then Landed Cost works great.  In you case, I always recommend to set up groups and set up the LC's as a percentage as a contra to your Freight In account.   It is easy, no trouble matching landed cost invoices as it can be a transactioanl nightmare if heavy volume.   Find a freight in percent that can be assigned to all items or the group to assign freight to, then when the item is received the 5% or whatever number you come up with is added to the cost of the item so IV is debited and the Freight In or Freight In Contra account is credited.  The trick is to pick a percent that will consume the Freight in dollars.  The Freight bills from UPS or whomever is then debited to the Freight In account.   Has worked well for me.

    Dan Liebl, CMA CPIM | Senior Consultant | OTT,Inc | DLiebl@OTT-inc.com

  • Suggested answer
    Dale Coulthard Profile Picture
    Dale Coulthard 3,055 on at

    Please let me know if I am wrong in the following statement.  Even if you are using perpetual, if you turn over your inventory quickly, then landed costs may not work or pose problems.  I thought our company had looked into landed cost (so we could get freight into the cost), but I thought we realized that a lot of our items are sold before we get the freight bill so GP would not be able to reflect this accurately.  We are still expensing our freight because of the "problem" with high turnover items.  I have not looked at GP 2010 to know if somehow this area was resolved, but I doubt it can be since the sale has already happened at GP has to post the cost at the time of posting the sale.  Please let me know if I am leading everyone astray in my post so that I know that I need to research this area for our organization as well.  Thank you.

  • Suggested answer
    Dan Liebl Profile Picture
    Dan Liebl 7,320 on at

    There are different ways to set up landed cost.   If you try to match the exact freight bill to the exact layer, then your statement is correct, assuming the turns are quick.   What I was trying to explain is you can set up LC to be a percentage of the cost and this can be assigned up front (at time of receipt).   You do lose the regular frieght charge to this layer and the expedited charge to that layer, but are able to add a freight cost to each layer which will smooth out the valleys.   It is easy as there is no entry of the cost for that receipt, and no matching of a freight bill to an inventory receipt, just adding the landed cost unless you assign the group on the Qty Maint window which then relieves even that entry.   There will be a variance on the GL as you are estimating the freight cost percentage for each item ahead of time, then the freight invoices are entered via AP and go to the GL Freight In account.   The percentage then reduces the freight in account and increases the inventory value.   The inventory is then expensed.   It is tough to try to explain it but hopefully that helps.

    With regard to my periodic vs perpetual statement is that Std cost rollups do not recognize the LC so when receiving is done in  Std cost environment, it just creates a variance.   Doesn't work well there.  

    Dan Liebl, CMA CPIM | Senior Consultant | OTT,Inc | DLiebl@OTT-inc.com

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