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How do you add additional costs to inventory items, e.g. duty and shipping. We purchase up to 20 or 30 items at a time so have to distribute the cost among each item.

We purchase items from the states, each invoice can have up to 20 or 30 items on it.  Each of these items are inventory.  We get separate invoices for the duty and shipping expenses that we want to include in the overall cost of the inventory.  How do I add these costs to the inventory items.  

Currently I am posting the shipping and duty invoices to a clearing account.  Then I use a spreadsheet to apportion the extra costs to the items to determine their adjusted unit price.  When entering the vendor's bill, I use my adjusted cost to enter each inventory item, then I enter a credit to the clearing account to clear that amount and reduce the bill back down to what the vendor actually charged me.  But there must be a better way to do this.!

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Best answer 03-11-2019

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Established Community Backer ***

@ jane The inventory valuation method (average cost, FIF...

@ jane

The inventory valuation method (average cost, FIFO, LIFO, etc) has nothing to do with the requirement to account for all costs to get an item on hand and ready for sale as the item cost.

Outside costs, third party shipping, customs, etc require a work around in all versions of QB.

enter the bill for the items/qty received and enter the cost per item as you know them at that time.  That stocks the items with qty and cost.

When you pay additional costs, shipping customs, etc do just what you are doing now, post them to a clearing account.

Then edit the original bill
1. add a portion of the total amount in the clearing account to each item total cost
2.  In the account details part of the bill, select the clearing account, and enter the full amount in that account as a negative number.  The total of the bill will not change, save an clck through any warnings about payments being applied

QB will then, go back and adjust the cost per item on that purchase to reflect the increased costs.  And if any have been sold in between the receive date and the date you added the costs, QB will automatically make an adjustment entry in both inventory asset and COGS only for those items sold, bringing COGS up to date for the new cost per item.  That adjustment will show in a detail report for COGS as having a Bill as the source of the adjustment.



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18 Comments
Established Community Backer ***

@ jane The inventory valuation method (average cost, FIF...

@ jane

The inventory valuation method (average cost, FIFO, LIFO, etc) has nothing to do with the requirement to account for all costs to get an item on hand and ready for sale as the item cost.

Outside costs, third party shipping, customs, etc require a work around in all versions of QB.

enter the bill for the items/qty received and enter the cost per item as you know them at that time.  That stocks the items with qty and cost.

When you pay additional costs, shipping customs, etc do just what you are doing now, post them to a clearing account.

Then edit the original bill
1. add a portion of the total amount in the clearing account to each item total cost
2.  In the account details part of the bill, select the clearing account, and enter the full amount in that account as a negative number.  The total of the bill will not change, save an clck through any warnings about payments being applied

QB will then, go back and adjust the cost per item on that purchase to reflect the increased costs.  And if any have been sold in between the receive date and the date you added the costs, QB will automatically make an adjustment entry in both inventory asset and COGS only for those items sold, bringing COGS up to date for the new cost per item.  That adjustment will show in a detail report for COGS as having a Bill as the source of the adjustment.



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Thanks, you explained why I am doing what I am doing to J...

Thanks, you explained why I am doing what I am doing to Jane.  I am doing what you described, I just have been doing it all at once.  I hadn't thought about editing the invoice later.  The spreadsheet I use, I enter in the vendor list price and qty I ordered, then use formulas to create an extended cost per unit adding in the shipping and duty costs based on a % of the total order for each item.  Then I enter it once into QB, with the clearing accounts as you described.
Frequent Explorer **

HI Jane, my inclination would be to post these items dire...

HI Jane, my inclination would be to post these items directly to COGs, using a non inventory part, as this is a lot of extra work, for what purpose? 

Can you give me a really good reason why it's necessary to break these costs down in a FIFO tracking system?

You could at year end, estimate an approximate cost of shipping and duty to be added to inventory for year end purposes and reversed out the next day if someone needed to be that specific about the cost of inventory held vs COGs during the year.

I'm not sure I would have an easier way to handle this. If it was Desktop, there might be a way to automate, but with QBO, I doubt it. Anyone else care to comment?

Not applicable

In order for us to keep track of our margins, we want to...

In order for us to keep track of our margins, we want to know how much each inventory item actually costs.  That includes the shipping, duty, etc.  If we don't add it into the inventory, then the reporting in QB does not give you as good information.  It s a bit more work to do up front, but then I can do analytics, like compare my average pricing vs my sales price to make sure I am charging enough for each item.  We also have US exchange that fluctuates as well and our shipping and duty is quite expensive so it is material to us.  If these charges are not that much, it might not matter. I think you have to evaluate whether it is worth it for you or not.
Anonymous
Not applicable

I agree with Jane on this one.  I have a client with a pr...

I agree with Jane on this one.  I have a client with a product that incurs extremely low material & assembly costs, but the shipping costs are significant.  It is really difficult to make sound business decisions on product lines when the majority of the inventory costs are lumped into shipping expense.  I recognize that small companies would prefer to take the expense as incurred and reduce their tax liability, but it really clouds the product mix analysis.
Frequent Contributor *

Re: In order for us to keep track of our margins, we want to...

Hi Jane, I agree with you that we should know the actually cost for each inventory item, so that we can make sure that the price we charge is enough.

My company uses landed cost to input each inventory items, and we also use excel to calculate the landed cost for each item. My question is, if the vendor sends us the invoice of  duty and shipping next month along with next shipment, should I allocate that duty and shipping fee to the next shipment or last shipment? If I apply those to last shipment, then I will get negative duty and shipping fee since the inventory billing date and duty freight date are not in the same month. 

QuickBooks Team

Re: In order for us to keep track of our margins, we want to...

Good day, Eva2019.

 

When you receive the bill, you should enter all the details from it to QuickBooks Online. If there is a shipping fee added on the next shipment, you should enter it. If there's another shipping fee on the last one, enter it as well. You don't have to add the fee in a lump sum amount. It might be the reason why you get a negative duty.
 

You can always go back to this thread if you have further questions.

Established Community Backer ***

Re: In order for us to keep track of our margins, we want to...


@Kristine Mae wrote:

Good day, Eva2019.

 

When you receive the bill, you should enter all the details from it to QuickBooks Online. If there is a shipping fee added on the next shipment, you should enter it. If there's another shipping fee on the last one, enter it as well. You don't have to add the fee in a lump sum amount. It might be the reason why you get a negative duty.
 

You can always go back to this thread if you have further questions.


This answer shows the Quickbooks Team member has no idea of the issue here and how inventory works in Quickbooks.  And the ambiguity does not hide that.   It would be better to remain silent. 

Frequent Contributor *

Re: In order for us to keep track of our margins, we want to...

Thank you for your kind reply, Kristine.  Our vendor always prepaid the duty and shipping fee for us , then charge them back along with the new shipment. For example, we had A shipment from oversea, they sent us the invoice without duty and shipping charge. They said they will charge us along with next B shipment maybe 1 month later, so what should I input the item's cost when I create the purchase order for A shipment? 

QuickBooks Team

Re: In order for us to keep track of our margins, we want to...

Hi there, @Ivy2019.

 

I appreciate you coming back to us for additional support. Allow me to join this thread and clear this up for you.

 

You have two options on how to input the item's cost:

  • First, you can add the duty and shipping charge on the purchase order. When the vendor pays the A shipment, you can just enter the partial amount (which is without the charge). Then, this PO will only be tagged as closed once the payment is complete.
  • Second, you can just add and record the duty and shipping charge on their upcoming transaction, B shipment. 

Let me know which option you prefer by adding a comment below, Eva2019. I'm still here to help you more if you have additional questions. Have a good one.

 

Frequent Contributor *

Re: In order for us to keep track of our margins, we want to...

Quickbooks does not have a way of dealing with shipping costs added as a per item basis?  Really!!

My 25 year old POS system had a field in the purchase order receive function just for shipping costs.  How is this not included in QBO?  

Frequent Explorer **

Re: In order for us to keep track of our margins, we want to...

Hi, the best I can do is to recommend you post this as a suggestion. QBO is a work in progress and suggestions are voted up by those who care about it's continued progress. Have a lovely day.

Established Community Backer ***

Re: In order for us to keep track of our margins, we want to...


@TaxDetective wrote:

Hi, the best I can do is to recommend you post this as a suggestion. QBO is a work in progress and suggestions are voted up by those who care about it's continued progress. Have a lovely day.


LOL

good sarcasm

Frequent Explorer **

Re: In order for us to keep track of our margins, we want to...

Whoa, when I first logged in I didn't get the entire thread. What puzzles me about these answers is that shipping costs aren't always paid to the vendor from whom the goods are purchased.  So the recommendation that you go in and edit the original Bill doesn't make sense on two fronts, one it's not the same vendor and two, if the dates on the bills are different, and in fact there are two different bills even if from the same vendor, why would you edit one to add the second? I'm totally confused.

In QBDT we had a way to add an estimate of the labour or other costs to the COGs in order to record additional costs, but I don't see a way to do that in QBO. Maybe I'm missing something?

Established Community Backer ***

Re: In order for us to keep track of our margins, we want to...


@TaxDetective wrote:

Whoa, when I first logged in I didn't get the entire thread. What puzzles me about these answers is that shipping costs aren't always paid to the vendor from whom the goods are purchased.  So the recommendation that you go in and edit the original Bill doesn't make sense on two fronts, one it's not the same vendor and two, if the dates on the bills are different, and in fact there are two different bills even if from the same vendor, why would you edit one to add the second? I'm totally confused.

In QBDT we had a way to add an estimate of the labour or other costs to the COGs in order to record additional costs, but I don't see a way to do that in QBO. Maybe I'm missing something?


Different situation from what was originally asked - you are asking about landed costs.

 

1. receive the items as you usually would

2. as each additional bill comes in (shipping, customs, storage, etc)

2a. pay the bill using a clearing expense account

2b. edit the original bill, in the item part increase the total of each item by a portion of the new bill

2c. then in the account part select the clearing expense account and enter that amount as a negative number

2d. insure the total of the original bill has not changed and save, click through any warnings about payments being applied

 

items now have an increased cost, the clearing expense account is zero balance, each bill is paid on the date appropriate to the bill

 

if any items were sold in between bills, QB will make adjustments to the COGS and inventory asset account, those adjustments will show as bill when you drill down on the COGS account

Not applicable

Re: @ jane The inventory valuation method (average cost, FIF...

If you edit the original bill from the vendor, the bill total in QB's won't match the vendor's bill.  When the vendor is paid, it will look like they were short paid.

Not applicable

Re: @ jane The inventory valuation method (average cost, FIF...

The vendor's bill does add up to the original amount.  The individual items are increased by the amount of the other invoice, e.g. shipping, but then you enter a negative item to zero the clearing account and then that brings the bill back down to what the vendor originally gave you.  That is how you check your work.  If the bill isn't what the vendor sent you, you've entered something wrong!

Not applicable

Re: @ jane The inventory valuation method (average cost, FIF...

Hello,

 

Do we need to add percentage of shipping and custom expenses to every items by percentage? 

This is a lot of work to do.

Farid