• Contents

Applying Import Costs to a Purchase Order

Last updated 04/10/2017

Import costs, such as freight fees and duty can be applied to Purchases in order to calculate accurate landed costs. This article explains in detail how import costs should be applied to Purchases.

Overview

Cin7 calculates landed costs very accurately. The process outlined in this article removes the need to manually calculate landed costs, and - when linked to your Accounting Software - prevents double entry.

To apply Import Costs to a Purchase:

  1. Create a Purchase Order for your products.
  2. Create additional Purchase Orders to match invoices you will receive from your clearance agent, freight forwarder or local customs office.
  3. Apply costs for each appropriate line item back to the original Purchase Order

1 - Create a Purchase Order for your Products

Step one is simple, just create a Purchase Order for your products as usual.

For more information on how to create Purchase Orders - see Creating a Purchase Order and Purchasing in a Foreign Currency.

2 - Create a Purchase Order for Import Costs

Create a Purchase Order (or Purchase Orders) for your import costs.

We recommend creating non-stock products for line items such as Freight and Customs Duty. You will find two non-stock products pre-loaded in your account, one for 'Freight' and one for 'Customs Duty'. Feel free to create additional non-stock products if you require additional line items. For more information on how to do this see the Non Stock section of our article Stock Control Methods.

To create a Purchase Order for import costs:

  1. From the left navigation select Purchase, then click New Purchase Order
  2. In the contact fields, enter the name of your clearance agent, freight forwarder or local customs office
  3. In the product grid below, enter the items on your order
    To view examples of how this should look, see our examples for Australia, New Zealand, UK and US
  4. Once all the line items have been entered, and the total matches the total of your invoice, approve the transaction

3 - Apply Import Costs to the original Purchase Order

Once your 'import costs' Purchase Order has been created, you now need to apply specific lines back to the original 'products' Purchase Order. To do this:

  1. Make note of the original Purchase Order number - copy to the clipboard if necessary
  2. Open the Freight Purchase Order
  3. Against the freight component of this purchase click into the Transactions Link box
  4. Search for the product Purchase Order by entering the full PO number (including the '-')
  5. Click Allocate to apply the Freight to the Purchase Order
  6. Click Save to confirm, then Save the transaction

Please note that the freight Purchase Order must have been saved before Transactions can be linked.

If your import costs Purchase Order relates to more than one product Purchase Order, you may wish to divide the costs between multiple Purchase Orders. To do this:

  1. Click Transaction Links as shown above
  2. Search for the first Purchase Order, then allocate the costs to this Purchase Order
  3. With the linked transaction box still open, change the Qty field to a fraction of the original quantity. I.e. if dividing the cost between two purchases, change the Qty to 0.5, like so:
  4. Search for the next Purchase Order, and allocate the next amount to this Purchase, until you end up with multiple lines, like so:

This method will divide the import costs evenly between the two purchases. However if you wish to apply a greater amount to one Purchase Order than the other, you will have to decide on the correct percentages to do this.

Distribution of Costs

Once the costs have been applied, returning to the original Purchase Order will reveal some new fields:

These fields will correlate to the costs applied to the Purchase Order. Any product with 'customs' in the name will be treated as Duty. All other costs including Freight will appear in the Freight/Other box.

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

Freight costs can be distributed in three different ways:

Method Description
Value This is the default method used. Freight costs are distributed by value, so 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. 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 Metres The method uses volume - the larger items receive a larger portion of the freight. The dimensions of each products are specified in the product details page. This method is most appropriate if the size of your products vary significantly.
Customs

Customs Duty is distributed over the entire order by value of the products, i.e. the more expensive goods receive a larger portion of the Duty.

FAQs

How will my freight purchase appear in my accounting software?

If you are using the Perpetual method of accounting, then those line items that have been applied to other Purchase Orders will be imported as Inventory, and all other items imported as expenses.

If using the Periodic method, all line items will be imported as expenses.

I see your weights and dimensions are in metric - can they be changed to imperial?

We can't change the field description, however if you were to enter weight as pounds or ounces, there is no technical reason why cost distribution shouldn't work, provided you enter the unit consistently across all your products, and the weight is in whole units. The same goes for dimensions.

Can I apply landed costs to a Purchase Order after the receipt of the goods?

Yes, this is possible. To do this, create a new purchase order for the landed costs, click in Transaction Links column and link it to the original purchase order. The landed costs will be applied accordingly.