Landed costs are the additional “hidden” costs incurred in getting goods you purchase from your supplier to your premises. The total cost of a product to you is not only the purchase price of that product but also the following
- freight & shipping costs
- insurance
- warehousing and handling costs
- customs duties and other taxes
Knowledge of the purchase price and the additional landed costs are critical in understanding the true value of your stock. You need to know the total cost of a product to set the selling price in order to determine your profit margin. If you have not incorporated these additional landed costs in calculating the selling prices of your products, then you are lowering your margin which is directly affecting your bottom line. Landed costs can be quiet considerable in relation to the actual purchase price of a product, especially if you import, so it is vital to be able to calculate them accurately.
Benefits of knowing your Landed costs
- A far more accurate way to value your stock.
- Improves visibility – you see the real cost of a
product. - Maximise profits: set an accurate selling price for goods with the full understanding of the charges associated with bringing an item into your business.
- Enhance competitiveness.
It is important that your stock & purchasing system is able to handle Landed costs and not just the actual purchase price of stock items. Most advanced systems have landed costs functionality, so have a look to see if your system does and start using this important function. We in Russell Brennan Keane are familiar with working with clients to calculate their landed costs & correct selling prices, therefore improving their bottom line.
Pegasus Opera 3 is one of the latest accounting solutions to incorporate landed costs functionality into its supply chain management. Click on the attached link to get more details about how Pegasus opera deals with landed costs.
If you think Landed costs is something that you should examine in more detail in your business , then please give us a call and we will work with you to determine your landed costs & how to incorporate them into your existing stock system. Call Arline Watson on 090 64 80692 or e-mail awatson@rbk.ie
