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janenebg
March 12, 2019
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How do you add additional costs to inventory items, e.g. duty and shipping. We purchase up to 20 or 30 items at a time so have to distribute the cost among each item.

  • March 12, 2019
  • 2 replies
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We purchase items from the states, each invoice can have up to 20 or 30 items on it.  Each of these items are inventory.  We get separate invoices for the duty and shipping expenses that we want to include in the overall cost of the inventory.  How do I add these costs to the inventory items.  

Currently I am posting the shipping and duty invoices to a clearing account.  Then I use a spreadsheet to apportion the extra costs to the items to determine their adjusted unit price.  When entering the vendor's bill, I use my adjusted cost to enter each inventory item, then I enter a credit to the clearing account to clear that amount and reduce the bill back down to what the vendor actually charged me.  But there must be a better way to do this.!

Best answer by Rustler

@ jane

The inventory valuation method (average cost, FIFO, LIFO, etc) has nothing to do with the requirement to account for all costs to get an item on hand and ready for sale as the item cost.

Outside costs, third party shipping, customs, etc require a work around in all versions of QB.

enter the bill for the items/qty received and enter the cost per item as you know them at that time.  That stocks the items with qty and cost.

When you pay additional costs, shipping customs, etc do just what you are doing now, post them to a clearing account.

Then edit the original bill
1. add a portion of the total amount in the clearing account to each item total cost
2.  In the account details part of the bill, select the clearing account, and enter the full amount in that account as a negative number.  The total of the bill will not change, save an clck through any warnings about payments being applied

QB will then, go back and adjust the cost per item on that purchase to reflect the increased costs.  And if any have been sold in between the receive date and the date you added the costs, QB will automatically make an adjustment entry in both inventory asset and COGS only for those items sold, bringing COGS up to date for the new cost per item.  That adjustment will show in a detail report for COGS as having a Bill as the source of the adjustment.



2 replies

Rustler
RustlerAnswer
March 12, 2019

@ jane

The inventory valuation method (average cost, FIFO, LIFO, etc) has nothing to do with the requirement to account for all costs to get an item on hand and ready for sale as the item cost.

Outside costs, third party shipping, customs, etc require a work around in all versions of QB.

enter the bill for the items/qty received and enter the cost per item as you know them at that time.  That stocks the items with qty and cost.

When you pay additional costs, shipping customs, etc do just what you are doing now, post them to a clearing account.

Then edit the original bill
1. add a portion of the total amount in the clearing account to each item total cost
2.  In the account details part of the bill, select the clearing account, and enter the full amount in that account as a negative number.  The total of the bill will not change, save an clck through any warnings about payments being applied

QB will then, go back and adjust the cost per item on that purchase to reflect the increased costs.  And if any have been sold in between the receive date and the date you added the costs, QB will automatically make an adjustment entry in both inventory asset and COGS only for those items sold, bringing COGS up to date for the new cost per item.  That adjustment will show in a detail report for COGS as having a Bill as the source of the adjustment.



    J
    janenebgAuthor
    March 12, 2019
    Thanks, you explained why I am doing what I am doing to Jane.  I am doing what you described, I just have been doing it all at once.  I hadn't thought about editing the invoice later.  The spreadsheet I use, I enter in the vendor list price and qty I ordered, then use formulas to create an extended cost per unit adding in the shipping and duty costs based on a % of the total order for each item.  Then I enter it once into QB, with the clearing accounts as you described.
    TaxDetective
    TaxDetective
    March 12, 2019

    HI Jane, my inclination would be to post these items directly to COGs, using a non inventory part, as this is a lot of extra work, for what purpose? 

    Can you give me a really good reason why it's necessary to break these costs down in a FIFO tracking system?

    You could at year end, estimate an approximate cost of shipping and duty to be added to inventory for year end purposes and reversed out the next day if someone needed to be that specific about the cost of inventory held vs COGs during the year.

    I'm not sure I would have an easier way to handle this. If it was Desktop, there might be a way to automate, but with QBO, I doubt it. Anyone else care to comment?

    J
    janenebgAuthor
    March 12, 2019
    In order for us to keep track of our margins, we want to know how much each inventory item actually costs.  That includes the shipping, duty, etc.  If we don't add it into the inventory, then the reporting in QB does not give you as good information.  It s a bit more work to do up front, but then I can do analytics, like compare my average pricing vs my sales price to make sure I am charging enough for each item.  We also have US exchange that fluctuates as well and our shipping and duty is quite expensive so it is material to us.  If these charges are not that much, it might not matter. I think you have to evaluate whether it is worth it for you or not.
    I
    Ivy2019
    March 12, 2019

    Hi Jane, I agree with you that we should know the actually cost for each inventory item, so that we can make sure that the price we charge is enough.

    My company uses landed cost to input each inventory items, and we also use excel to calculate the landed cost for each item. My question is, if the vendor sends us the invoice of  duty and shipping next month along with next shipment, should I allocate that duty and shipping fee to the next shipment or last shipment? If I apply those to last shipment, then I will get negative duty and shipping fee since the inventory billing date and duty freight date are not in the same month. 

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