Table of contents
What Are Landed Costs?
The total expenses incurred in obtaining a product and bringing it to the buyer's location is what we refer to as the landed cost. It provides a comprehensive view of the total investment required to acquire goods and bring them to their final destination, helping businesses like eCommerce, wholesale distribution, and logistics accurately calculate product costs and make informed pricing and inventory decisions.
Expenses that contribute to landed costs can include the following:
- shipping charges
- freight fees
- import fees
- duty fees (excise and customs)
- taxes
- insurance
- handling charges
Setting Up Landed Costs in NetSuite for 2024
Establishing landed costs may seem complex at times, yet we've simplified the process with clear steps, so you can navigate through it effortlessly:
Enabling Features for Landed Cost
To enable the Landed Cost feature, follow these steps:
- Using the Administrator Role, go to Setup > Company > Setup Tasks > Enable Features.
- Under the Inventory subtab, check the Landed Cost box.
- Click Save.
Configuring Landed Cost Categories
To create a Landed Cost category, follow these steps:
- Go to Setup > Accounting > Setup Tasks > Accounting Lists > New.
- Click Cost Category.
- Select Expense Account.
- Enter a name for the expense account.
- Click Save.
Note:
Make sure to select the correct Expense Account to avoid issues when creating transactions with Landed Cost and linking Freight Bill to an Item Receipt.
Setting up Item Record for Landed Cost
To track landed costs for specific items, you must identify it on the item record. To set up an item record for landed cost accounting, follow these steps:
- Go to Lists > Accounting > Items.
- Click Edit next to the item for which you want to track landed cost.
- On the Purchasing/Inventory subtab, check the Track Landed Cost box.
- Click Save.
You can now input landed cost details on item receipts and bills that involve the item.
Setting up Item Record to track Landed Cost Separately
To track the landed cost separately, follow these steps:
- Go to Lists > Accounting > Items > New.
- Select an item type you want to create to track the landed cost.
- In the Item Name/Number field, enter a unique name for the landed cost expense.
- In the Accounting subtab, in the Expense Account field, select the account on which you want to record freight and other such charges.
- Click Save.
Tracking Landed Costs in NetSuite
Monitoring landed costs involves keeping a close eye on expenses associated with acquiring and transporting goods, ensuring accurate financial management and informed decision-making. Check out these methods to track landed costs:
Tracking and Allocating Methods
In NetSuite, there are different ways to track and assign landed costs to transactions and items. Some NetSuite costing methods are:
- Weight or Volume Allocation: Assign costs based on the weight or volume of received items. Useful for goods like liquids or bulk materials.
- Percentage Allocation: Distribute costs based on a set percentage of the total. Each item gets a share according to its cost value.
- Quantity Allocation: Divide costs evenly among received items, regardless of their individual costs.
- Custom Allocation Rules: Create personalized rules in NetSuite based on factors like item category, supplier, or transaction type. This gives flexibility in assigning costs to meet specific business needs.
- Automated Allocation: Use NetSuite's automation features to streamline cost allocation. Set up rules that automatically assign costs based on predefined criteria, saving time and ensuring accuracy.
Real-Time Tracking and Updates
In NetSuite, real-time tracking and updates for landed costs let you handle these costs as transactions happen. Instantly see landed cost data, including any changes during procurement and shipping.
With real-time tracking and updates in NetSuite, you can:
- Monitor Transactions: Keep an eye on total landed costs for different transactions like purchase orders, inventory receipts, and vendor bills as they happen.
- Receive Instant Updates: Stay updated with landed cost data, like changes in shipping charges, customs duties, or handling fees.
- Ensure Accuracy: Report and analyze finances more precisely better with more accurate landed cost calculations and allocations.
Estimated Landed Cost
Automatically calculate landed cost estimates for each transaction line item with the use of landed cost templates as necessary. Templates can be set up with multiple cost categories each assigned with its own allocation method. Landed cost estimates are derived from the allocation method and cost factor, which you can update as needed.
Calculating Estimated Landed Cost in NetSuite
Landed cost templates can be added to the following item types to track landing cost:
- Inventory Items
- Assembly Items
Estimated Landed Cost can be used on the following transactions:
- Purchase Order
- Item Receipt
- Standalone Vendor Bill
When assigning landed cost templates to transaction line items, landed cost estimates are automatically applied as the items are received. You can receive large orders without having to manually apply landed cost estimates for each of the items.
Reconciling Estimated Landed Cost with Actual Costs
Regularly check and revise landed cost of NetSuite estimates with these steps:
- Go to the Landed Cost feature in NetSuite.
- Review existing landed cost estimates to ensure accuracy.
- Adjust estimates based on variances in shipping costs, customs duties, or other relevant factors.
- Confirm the updated estimates by comparing them with actual costs incurred.
- Document any differences from the estimates.
- Share the updated estimates with relevant stakeholders like finance teams or procurement managers.
- Keep an eye on landed costs to spot any significant changes.
- Analyze how total landed costs affect overall product costs and profitability regularly.
By keeping landed cost estimates up to date, businesses can maintain accurate financial reporting, manage costs, and make well-informed decisions on supplier negotiations and pricing strategies.
Advanced Landed Cost Management Strategies
Dynamic Cost Allocation
With the help of NetSuite allocation rules in NetSuite, you can implement dynamic models to allocate landed costs based on factors such as item category, supplier, or transaction type for better cost management.
Automate Calculations
Implement automated algorithms or processes to allocate landed costs to products or transactions based on predefined rules to reduce manual effort through NetSuite workflows and scripts.
Utilize Predictive Analytics
With the latest predictive analytics in NetSuite, you can forecast future landed costs based on historical data and market trends. Predictive models help in risk management by anticipating fluctuations in cost.
Best Practices for Landed Cost Management in 2024
Regular Reconciliation
Regularly compare estimated landed costs with actual costs to make accurate financial reports.
Accurate Cost Allocation
Implement accurate methods for allocating landed costs to products or transactions to ensure fair distribution and precise financial reporting.
Integrating with Logistics
Integrate landed cost management with supply chain processes to gain visibility into cost implications and optimize logistics and procurement strategies.
Conclusion
Landed costs are expenses associated with acquiring and delivering a product to the buyer's location. To automatically calculate these landed costs, you can set up landed cost estimates for each transaction line item with the use of landed cost templates.
By diligently reconciling these estimated landed costs with actual expenses, businesses make better financial reports and well-informed decisions. Leveraging advanced strategies like dynamic cost allocation and automated calculations not only streamlines processes but also strengthens cost management practices.
Through integration with logistics and utilization of predictive analytics, businesses can anticipate market trends and mitigate potential risks effectively. Embracing these best practices positions businesses to navigate the evolving landscape of financial management with more resilience.
