Landed Cost Voucher
Landed Cost Voucher
The total cost of delivering a product to the customer's home is known as the "landed cost."
It covers the item's original price as well as extra expenses like shipping, taxes, customs duties, insurance, currency conversion fees, and more. Even though not every component is applicable to every shipment, the landed cost must include all applicable charges.
The entire amount spent to have a product delivered to the customer's home is known 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: Let's say you are purchasing a brand-new washing machine. You find a lower price online after comparing prices in local stores and online. However, the total cost is higher than at your neighbourhood store when shipping is taken into account. Because the landed cost is lower, you choose to purchase locally.
Similar to this, figuring out an item's landed cost is crucial in business. It has a direct impact on your overall profitability and how you price your goods. Therefore, the item's valuation rate should include all relevant landed cost components.
Only 45% of companies make extensive use of landed costs, per a Third-Party Logistics Study. The primary causes of this are as follows:
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: Home > Stock > Tools > Landed Cost Voucher
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.
In the Receipt Documents table, add the relevant Purchase Invoice(s) or Receipt(s).
The Supplier Name and Grand Total will be fetched automatically.
Click Get Items from Purchase Receipts to pull item details from the selected documents.
In Distribute Charges Based On, choose how to split the cost:
Quantity → based on item quantity
Amount → based on item value
Under the Taxes and Charges section:
Add the Expense Account (e.g., Freight and Forwarding Charges).
Enter the Amount for each charge (e.g., shipping or customs fees).
These charges will be auto-distributed to items based on the method you selected (amount or quantity).
Save and Submit the voucher.
Notes: - You can add multiple Purchase Receipts/Invoices to one Landed Cost Voucher.
Charges will be proportionately distributed:
If based on Amount → Higher value items get a bigger share.
If based on Quantity → Higher quantity items get more cost assigned.
You can manually remove any item if charges don’t apply to it.
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
(accessible 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.
