The price on a supplier’s invoice is rarely what a unit costs you. By the time the goods are on your shelf you have usually paid for freight, customs duty, insurance, perhaps a broker or a handling charge. Those extras are part of the cost of the stock, and leaving them out has two effects: your stock looks cheaper than it is, and your margins look better than they are.
The cost that includes them is the landed cost.
The purchase price is the easy part. The share is where it gets interesting.
Splitting the extras across an order
Most extras arrive as one figure for a whole order: one freight invoice, one customs declaration. To value each product you have to split that figure across the order’s lines. There are three common ways to do it.
Take an order with two lines and €400 of freight and duty:
| Line | Units | Unit price | Line value |
|---|---|---|---|
| Product A | 100 | €20.00 | €2,000 |
| Product B | 400 | €5.00 | €2,000 |
By quantity. €400 over 500 units is €0.80 a unit, for both products. Product A goes from €20.00 to €20.80, up 4%. Product B goes from €5.00 to €5.80, up 16%. The cheap product carries a large share of the bill because it has more units.
By value. Each line carries a share in proportion to its value. Both lines are worth €2,000, so each takes €200. Product A carries €2.00 a unit (€22.00 landed, up 10%) and Product B €0.50 a unit (€5.50, up 10%). Every product goes up by the same percentage.
By weight or volume. Each line carries a share in proportion to how much it weighs or how much space it takes. It is the most accurate for freight, which is priced by weight and volume, but it needs the weight and size of every product, kept up to date.
| Method | Product A landed | Product B landed |
|---|---|---|
| By quantity | €20.80 | €5.80 |
| By value | €22.00 | €5.50 |
Splitting by value is the usual default: it needs no extra data, and duty and insurance are themselves charged on value. Splitting by quantity can badly distort cheap, high-volume products, which are exactly the ones where a few cents decide whether you make money.
What to include
Include the costs you pay to bring the goods into stock: freight and carriage to your warehouse, customs duty, freight insurance, broker or clearance fees, and handling charges at the port or warehouse.
Leave out costs that are not about getting these goods to you: storage once the goods are on your shelf, selling costs, and recoverable VAT, which you get back rather than spend.
Why it matters
Pricing. If you set prices from the supplier’s price, you can sell a product below what it cost you without noticing. The difference is largest on bulky, cheap goods and on anything that comes from abroad.
Stock value. The value of what you hold should reflect what you paid to have it. Stock valued without its landed costs understates your assets, and the costs then show up in the accounts somewhere else, unallocated.
Supplier comparison. A supplier with a lower price and an expensive route to your door can cost more than a nearby one. Comparing landed costs, not unit prices, makes that visible.
How StockBold handles landed costs
In StockBold you record the extras on the purchase order: a shipping cost, and additional costs such as customs duty, freight, insurance, handling or other charges. StockBold splits them across the order’s lines in proportion to each line’s net value, then divides by the line’s quantity to get a landed cost per unit. A breakdown on the order shows the split line by line, so you can check it.
Received goods enter stock at their purchase price, converted into your currency at the order’s rate, plus that landed cost per unit. Additional costs raise the value of the stock without changing what you owe the supplier on the order. Whether the order’s shipping cost is included is a setting the owner chooses for the organisation. Your stock valuation and reports then work from those real costs.
Read more about shipments and receiving, or the help guide on shipping and additional costs on a purchase order.