Landed Cost Voucher
The overall amount of expenses incurred in transportation of a product to the door of the customer is called the landed cost.
It includes the initial cost of the item and other additional costs such as freight, tax, duty charges, freight insurance, and currency exchange costs, among others. Although not all the components are applicable to all shipments, all the applicable charges should be included in the landed cost.
The total expenditure to deliver a product to the home of the customer is referred to as the landed cost. It consists of:
Base item cost
Shipping and freight charges
Customs charges
Insurance and taxes.
Fees associated with currency conversion
Any additional expenses related to the purchase
The relevant ones must be taken into account when determining the final landed cost, even though not all of these factors apply to every shipment.
Real-World Example: Suppose that you are buying a new washing machine. You get a cheaper price on the internet when you compare the prices in the physical shops and the internet. Nonetheless, it is more expensive than your neighbourhood store when the cost of shipping is considered. The landed cost is lower, and therefore you make decisions to buy locally.
Like this, it is important in business to determine the landed cost of an item. It affects directly on your overall profitability and pricing of your goods. Thus, all the relevant elements of landed costs should be incorporated in the valuation rate of an item.
According to a Third-Party Logistics Study, only 45% of the companies use landed costs extensively. The main reasons, which lead to this, are:
Unavailable information (49%).
Inadequate equipment (48%)
Not enough time (31%).
Lack of clarity regarding the application of landed cost (27%).
To view the Landed Cost Voucher list in ERPNext:
1. Prerequisites
Prior to creating a Landed Cost Voucher, ensure that you have the following:
The goods received into stock are recorded on a purchase invoice or receipt that has the option to "Update Stock" enabled.
A purchase invoice for additional fees such as customs duty, goods, insurance, etc.
After creating both, you can modify the stock value using the Landed Cost Voucher by:
Lowering the cost listed on the second purchase invoice
Using the landed cost to raise the item value in your inventory
2. How to Create a Landed Cost Voucher
Follow these steps to create a Landed Cost Voucher:
Go to: Home > Stock > Tools > Landed Cost Voucher
Click on New.
Under Receipt Document Type, select either:
Purchase Receipt
Purchase Invoice You can select multiple documents if needed.
Add the appropriate Purchase Invoices(s) or Receipt(s) in the Receipt Documents table.
Supplier Name and the Grand Total will be automatically fetched.
Click Get Items from Purchase Receipts and drag item detail in the selected documents.
On Distribute Charges Based on, select the division of the cost:
Quantity - depends on the quantity of items.
Amount → based on item value
In the area of Taxes and Charges, the following is stated:
Add the Expense Account (e.g. Freight and Forwarding Charges).
Add the value of each item on charge (e.g. shipping fees or customs fees).
These charges will be automatically shared to the items depending on the method that you used (amount or quantity).
Save and Submit the voucher.
Notes: - It is possible to add more than one Purchase Receipt/ Invoices to a Landed Cost Voucher.
The fees will be distributed proportionately:
When it is based on Amount Higher value items obtain larger share.
Assuming it is on Quantity Higher quantity items will receive more cost.
You may delete any item by hand in case it is not charged.
3. Related Actions
3.1 Adding Landed Cost in the Purchase Receipt itself
The "Taxes and Charges" table in ERPNext allows you to include landed cost components straight in the Purchase Receipt.
Make use of the "Consider Tax or Charge for" field:
For charges owed to the same supplier, the total and valuation →
Assessment for fees owed to a third party (such as a goods forwarder)
After submission, the system will take these additional fees into account when determining the items' valuation rate using either FIFO or Moving Average.
In actual situations, though, not all charges are known at the time of receipt. For instance:
Invoices for goods or customs duties might show up weeks later.
It is not feasible to hold onto the purchase receipt until all invoices have been received.
This is where the Landed Cost Voucher (LCV) comes in handy; it enables you to apply these extra fees following the submission of the Purchase Receipt.
3.2 What Takes Place After an LCV Is Sent?
Upon submission of a Landed Cost Voucher:
The new charges are factored into the item's valuation rate.
If you have Perpetual Inventory turned on:
ERPNext modifies stock value by posting GL entries:
Debits the warehouse account
Credits the expense account used in the LCV
ERPNext will update the Cost of Goods Sold (CoGS) based on the updated valuation by reposting GL entries if any items have already been delivered.
3.3 LCV for Stock Entry
(Available from ERPNext v16)
In Version 16, it is possible to create a Landed Cost Voucher for a Stock Entry with the purpose set to "Manufacture." This allows you to factor in extra costs like rent, utilities, or electricity when determining the final value of the manufactured good.
3.4 Subcontracting Receipt LCV
(Available via ERPNext v16)
In Version 16, Landed Cost Vouchers can also be used to create subcontracting receipts. This makes it simpler to account for extra costs when valuing subcontracted goods that are acquired from outside producers, such as goods or excise duty.
