Have a high level guideline in enabling and using the Landed Cost feature in NetSuite
- The following only serves as a general guideline. It is best that you review the guidelines first and determine whether it will suite on your business process and desired result.
- The email that you are about to read serves as a high level summary of the process, it would be best to review the documentations available in Support Hub and NetSuite SuiteAnswers as there are some notes that you might need to consider.
First, we need to understand how Landed Cost works in NetSuite.
The total cost of obtaining stock includes not only the material charge for an item, but also any charges associated with getting items into the warehouse and available for sale. These additional expenses contribute to the total cost of goods sold and affect inventory valuation.
Use the Landed Costs feature to track the expenses you incur when purchasing your inventory. Landed costs provide the ability to increase the asset value of inventory by including additional expenses associated with procuring stock, such as freight and duty fees.
Any landed cost associated with an item is added to the actual asset value of an inventory item, allowing you to calculate profitability accurately.
Next, after we have a general overview of Landed Cost in NetSuite and decided to use the feature, we will need to enable the feature as follows:
- Your administrator goes to Setup > Company > Setup Tasks > Enable Features.
- Under the Inventory heading, check the Landed Cost box.
- Click Save.
Third, we need to create a Landed Cost Category as follows:
- Go to Setup > Accounting > Setup Tasks > Accounting Lists > New.
- Click Cost Category.
- Select Expense Account
- Enter a Name
- It is best that we know which Cost Type and Expense Account to select. It is crucial that we select the correct Expense Account so that we will not have any issues when creating transactions with Landed Cost and linking Freight Bill to an Item Receipt.
Fourth, set up an Inventory Item to track landed cost:
- 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 must include an item that tracks landed costs on transactions you want to source for landed costs.
Fifth, we need to create a landed cost record to track separate cost
- Go to Lists > Accounting > Items > New.
- Click the item type you want to create to track the landed cost.
You can create an Other Charge item record called Freight, since freight is not an inventory item.
- In the Item Name/Number field, enter a unique name for the landed cost expense, such as Freight.
- On the Accounting subtab, in the Expense Account field, select the account on which you want to record freight and other such charges.
- Click Save.
- To associate a bill with landed costs, on the Items subtab, select an item. Since some bills, such as a separate freight bill, do not show an inventory item, you need to create landed cost item records to associate these expenses as landed costs.
Lastly, we will have to enter landed cost on transactions
On an item receipt or vendor bill, click the Landed Cost subtab.
- When you enter landed cost on these transactions, the cost can be applied to eligible items by weight, quantity or value.
- In the Cost Allocation Method field, choose Weight, Quantity, or Value.
Below the Cost Allocation Method field, one field shows for each landed cost category that you have created.
For example, if you created a Shipping category, you will see a Shipping field and a Source field.
- In the Source field beside each landed cost category, choose the source transaction type.
- In the field that appears below the Source field, select the transaction that includes the landed cost. Then, the total landed cost amount is the sum of the line items on the sourced bill that are associated with this landed cost category.
Complete the transaction as necessary.
If you have the above steps properly setup and you just want to link the Invoice on the Item Receipt:
- Edit the Item Receipt > go to Landed Cost tab
- Select a Cost Allocation Method
- Determine the correct Cost Category then select Source = Other Transactions
- On the Transaction list below the Source field, select the appropriate Bill
- NOTE: The Bill should have a Reference No. to be selected.