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Implementing landed costs into your business is critical to getting a true understanding of your stock costs. Landed costs are put in to give you visibility of the cost/profitability of selling an item and can include elements such as import/export taxes or perhaps delivery charges.
As you have most likely already experienced, you will often receive a separate invoice for these costs from your relevant supplier or agency after receiving the goods so this tool allows you to allocate an amount for landed costs on top of your direct cost of purchase. This is accounted for not only in your stock valuation but also in the cost of sales postings (depending on stock costing settings).
How do I implement landed costs into my Sage 200 system?
In sage 200, landed costs must be applied to 3 areas before they can be implemented. These 3 areas are:
- Stock Control Settings
- Product Groups
- Stock Items
1. Stock Control Settings
Path: | Stock Control | Utilities | System Set-Up | Stock Control Settings | Landed Costs Tab
As you can see it will create a separate nominal account for Landed Costs, you can edit this code and name for this nominal account as you please.
2. Product Group Settings
Path: | Stock Control | Stock Maintenance | Product Groups | Select your product group | Edit
So the question you want to ask yourself with this is; Do you want to set a default value? Remembering that this is the default value on the product group. You will be able to further set defaults at stock item levels.
As you can see, you have 3 options to choose from. So if you said:
“I don’t want a value to be Defaulted” = Not applicable by Default
“Yes, I want it to be a set percentage of…” = Percentage based by Default
“Yes, I want it to be a set value of…” = Value-based by Default
3. Stock Items[– Warning Sign –] To be able to configure landed costs on stock items, you must have landed costs enabled within the corresponding product group of that item.
Path: | Stock Control | Stock Records | Amend Stock Item Details | Landed Costs Tab
Finally, we have the Stock Item Details. Now, this tab is optional for you to set up as by default it is set to whatever is the Defaulted settings of the product group (if set). Your other options are to set up a default landed cost specific to this stock item. You may want to do this if you have an item that has a particularly heavy delivery charge for example and you know these particular items landed cost is going to be greater than all other items within its product group.
If you want to get even more detailed you can even look at setting up supplier-specific landed costs to account for working with suppliers in different parts of the world. For more information on this please look at this section on supplier-specific landed costs
Example of posting Landed Costs in Sage 200
The nominal account number for landed costs is 9991.
A stock item has a unit price of £200, and it has a set charge (value-based landed cost) of £15, as we set up previously in the above guide, specifically point 3.
We then create a purchase order for the item. For this example, £200 is the net goods value, £40 is the VAT value and £15 is the landed cost of the item. Then use the nominal code 1000, classified as stock, for the order.
The item is received and the purchase invoice is posted.
- Post £215 to the account 1000 (Stock), which is the cost price of the item (£200) plus the landed cost (£15).
- Then post -£15 to the account 9991 (Landed Costs).
- Next, post £40 to the account 2200 (Default VAT Input).
- Finally, post -£240 to the account 2000 (Creditor’s Control).
- And that’s it! We have accounted for all double entries related to this transaction.
Consequently, by having the ability to set up default landed cost values/percentage on the stock item level, it gives you a lot of flexibility and enables you to tailor your landed cost policy to suit your business and your supply chain. By taking the time to set up default Landed Costs on the product group and Stock Item level you can get an accurate understanding of the true stock value, much more accurate profitability reporting, not to mention saving yourself valuable time so that you have the freedom to focus on what you do best!