How to Track Landed Costs in NetSuite
What you can and cannot do in NetSuite
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When you want to have the cost of freight, duties, etc. be included in the cost/value of the inventory items that you are purchasing on a Purchase Order, the Landed Cost feature in NetSuite is the means of doing that. To track landed costs in NetSuite take these steps…
SETTING IT UP
1. Enable Features – Turn-On Landed Cost
2. Setup Cost Center
The next thing you have to setup is the Cost Center(s). Access this by going to Setup/Accounting/ Accounting Lists. Go to the bottom of the page and filter by Cost Center. When creating a new Cost Center, add the Description and then select the expense account to be used as a clearing account for the landed cost of items. When you ultimately get the Invoice from the Freight Vendor, that Expense Account will be debited and A/P will be credited.
3. Inventory Items
The next (and final) thing that you need to setup is the Inventory item – it needs to be flagged for “Track Landed Cost”.
Create a Purchase Order.
In this case the following Items were purchased:
Item Qty Qty Percent Extended Amount Amount Percent
ACC00001 1 33.33% $ 71.00 41.4%
ACC00002 2 66.67% $100.00 58.6%
3 100% $171.00 100%
Do A Purchase Order Receipt
You must notice a couple of things in the lower portion of the screen.
“Landed Cost Per Line” – If this is checked, you will see a couple of icons in the Lines of the Receipt. Check this box if you want to assign Landed Cost by Line/Item. Uncheck the box if you want to assign Landed Cost as a total amount. YOU CAN’T DO BOTH. Unfortunately you cannot assign Landed Costs at the Line level AND as an Amount. For example, if you were importing product from China, and there was a Duty of 5% for Item ACC00001 and a Duty of 10% on ACC00002, and there was also freight of $500 for Inbound Shipping, you would normally want to burden the Purchase Price of the Items with their respective Duties, and then distribute the Inbound Shipping cost across both Items. You cannot do this without some manual intervention.
Option 1 – Manually distribute the Inbound Freight cost. Check the box “Landed Cost per Line” and the click on the Landed Cost Icon in the Lines of the Receipt.
Select “Duty”, and then Enter the Amount
Add another Line, “Freight”, and calculate the amount of the freight that should be allocated to this Item.
In the above case, I’ve added 5%for Duty($3.55) and $166.65 (33% of $500) for Freight.
Likewise, add the 10% Duty and proportioned freight cost to ACC00002:
66.67% of $500 = $333.35 for Freight
10% Duty Rate times $100 = $10 for Duty
Here is the GL Impact:
The Inventory (Asset) account will be debited with ($684.35) which is the sum of the direct Item Costs plus the Landed Costs. The offsets are as follows:
PO Value = $171.00 Offset: Inventory Received Not Billed
Freight on ACC00001 = $166.65 Offset: Freight Expense
Freight on ACC00002 = $333.35 Offset: Freight Expense
Duty on ACC00001 = $ 3.55 Offset: Duty Expense
Duty on ACC00002 = $ 10.00 Offset: Duty Expense
When you receive the Freight and Duty costs from the Vendors, the Freight and Duty expense accounts will be debited and Accounts Payable will be credited.
IF YOU TURN OFF THE LANDED COST BY LINE, then those little icons go away, and you will enter your landed cost expenses in the Landed Cost subtab, and then elect to distribute those expenses across the Items by virtue of their a) quantity across total quantity, b) weight across total weight, or c) value across total value.
Selecting “Value, then you go ahead and enter the Duty and Freight totals.
If there is a Vendor Bill for Freight or Duty in the NetSuite system that has already been processed (unlikely), then you can select that transaction and have that amount populate the Amount field.
The below screen show does NOT use the $20,000 scenario above, and look at the GL Impact.
TECH SUPPORT: This makes total sense compared to the earlier Line example.
Notice that the Freight Expense is credited.
Now, let’s receive the NetSuite Vendor Bill.
Notice below that Freight Expense is Debited and A/P is credited.
What if the Bill for Freight is different than what was estimated and used. NetSuite will allow you to Reopen the Item Receipt and change the amounts to match the actuals, then re-save.
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