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Enter Import Costs in a Purchase Order

Last updated 30/06/2022

How to enter import costs, such as freight fees and customs duty, in Purchase Orders in order to calculate an accurate landed cost for the products in those Purchase Orders.
Refer to this article to understand how Import costs can be applied against a Purchase Order using the Linked Transaction functionality.

Note: Only one method of applying the landed costs must be used in a single Purchase Order, either via the linked transaction functionality or via entering it in the Landed Costs section of a Purchase Order. Using both against a single Purchase Order will corrupt the landed cost calculations of that Purchase Order.

Overview


Cin7 calculates landed costs very accurately. 

Prior to entering Import Costs in a Purchase Order, ensure you have entered the import cost invoice(s) directly in your Accounting Software under the relevant expense account.

To enter Import Costs in a Purchase Order:

  1. Open the Purchase Order which you would like the import costs to be added.
  2. Under the Landed Cost section, use the dropdown box to select the type of Import Cost you want to be added as a part of the landed cost.
  3. Enter the costs, in the "Amt" field, in your home currency for each line item.
  4. Repeat the above and add as many lines as you need using the "Add a new landed cost" button.

Distribution of Costs


Once the costs have been entered, the total import costs of each type are allocated to the products as follows:

Cin7 provides a useful report to break down exactly how costs have been distributed for a particular order. To view this report, hover over the cog icon in the Purchase Order module and then click Report

See Purchase Order Report for more information.

The total costs are allocated to products as follows:

Freight Costs

You can choose how the total Freight cost is distributed amongst the products from one of these three different ways:

Method Description
Value This is the default method used - the more expensive items receive a larger portion of the freight cost. This method is most appropriate if all your items have similar weights and dimensions.
Weight This method uses weight - the heavier items receive a larger portion of the freight cost. The weight of each product is specified in the product details page. This method is most appropriate if the weights of your products vary significantly.
Cubic Meters The method uses volume - the larger items receive a larger portion of the freight cost. The volume of each product is specified in the product details page. This method is most appropriate if the size of your products vary significantly.

Examples:

A purchase order has two product line items on it with the following details:

- $100 total value for Product A with a quantity of 5, weight of 5kg and volume of 2 cubic meters per item.

- $200 total value for Product B with a quantity of 10, weight of 10kg and volume of 9 cubic meters per item.

The total freight cost paid is $30.

Therefore, when $30 is entered as the total freight amount against this Purchase Order, Cin7 will split it and add it to the landed cost of each product, depending on the selected distribution method, as follows:

 

For Value distribution method:

-$30 x ($100 / ($100 + $200)) = $10 for Product A

-$30 x ($200 / ($100 + $200)) = $20 for Product B

 

For Weight distribution method:

- $30 x ((5 x 5) / ((5 x 5) + (10 x 10))) = $6 for Product A

- $30 x ((10 x 10) / ((5 x 5) + (10 x 10))) = $24 for Product B

 

For Volume distribution method:

- $30 x ((5 x 2) / ((5 x 2) + (10 x 9))) = $3 for Product A

- $30 x ((10 x 9) / ((5 x 2) + (10 x 9))) = $27 for Product B

 

Customs Duty Costs

The total customs duty amount is distributed according to the Customs Duty Rate applied against each product line item in the Purchase Order.

Example:

The two product line items on the Purchase Order above have the following custom duty rates applied as follows:

- Product A with a 5% customs duty rate applied against it

- Product B with a 10% customs duty rate applied against it

The total customs duty paid is ($100 x 5%) + ($200 x 10%) = $25

Therefore, when $25 is entered as the total customs duty amount against this Purchase Order, Cin7 will split it and add it to the landed cost of each product as follows:

- $25 x (($100 x 5%) / (($100 x 5%) + ($200 x 10%))) = $5 for Product A

- $25 x (($200 x 10%) / (($100 x 5%) + ($200 x 10%))) = $20 for Product B

Refer to this article to understand the setup of the customs duty rate that is used in the distribution.

 

FAQs

 

Can I add another account to the Landed Cost account drop-down?

Yes. See the How to Add A Custom Landed Cost Field Help article for additional information.

I see your weights and dimensions are in metric. Can they be changed to imperial?

Although the the field description cannot be changed, if you enter weight as "pounds" or "ounces", the given field will respect the entered value and the cost distribution should work without issue provided you enter the unit consistently across all your products, and the weight is in whole units. The same goes for dimensions.