What landed costs are: freight, customs and other charges

What Landed Costs Are

When you purchase inventory from a supplier, the true cost of that inventory is not just the purchase price. Landed cost is the total economic cost to bring goods into your warehouse and ready them for sale. It includes the purchase price plus all additional charges incurred to acquire and transport the goods.

Why It Matters

Accurate landed cost directly affects:

• Item cost tracking: Your cost-of-goods-sold (COGS) reflects the true expense, not an underestimated purchase price.
• Profit margins: If you don't account for freight and customs, your reported margins are artificially inflated.
• Inventory valuation: Your balance sheet will understate the value of stock if hidden charges are ignored.
• Pricing decisions: Knowing the full cost helps you set competitive prices that cover all expenses.

How It Works in Usystems

In Usystems, you record landed cost charges as extra line items on your purchase order or cash purchase document. Each charge line specifies:

• Charge type (e.g., freight, customs duty, insurance, handling fee)
• Amount (the cost of that charge)
• Allocation method (how to split the charge across the inventory items)

When the document is received and the inventory cost is calculated, Usystems automatically allocates these landed cost charges to each item based on the method you chose (by value, weight, or volume). The result is that each item's cost record includes its fair share of all landed costs.

Where You See It

• On purchase documents: Purchase orders and cash purchases show a Landed Costs section where you add freight, customs, and other charges.
• On the inventory ledger: When you view the cost history of an item, the price includes the allocated landed cost.
• In reports: Landed costs flow into your inventory valuation reports and COGS calculations.