Shipping included in sales price and margins

We're happy to see you here in the Community, droybal. Allow me to add some details about adding a line item on invoices.

Adding freight costs directly to your item prices impacts your margins significantly. I'd recommend maintaining your usual process of separating freight charges on your invoices to clarify the cost breakdown and will help you get accurate margins for those items.

Moreover, I suggest discussing with your accountant how to include freight costs in your item prices. They can provide financial advice, help you improve business processes, and share expertise to help you succeed. If you don't have one, you may use our Find an Accountant tool to find one near you.

You may also want to check out these articles about setting up landed costs in QuickBooks:

• Landed cost in QBDT Enterprise
• Landed cost FAQs 

Finally, check out this article containing insights that can help you generate personalized reports based on your specific needs: QuickBooks Advanced Reporting (QBAR).

Let us know in the comments if you have further concerns about sales freight in QuickBooks Desktop. We're always here to help you out. Stay safe!

@droybal 

Which QB Desktop year version do you have? Pro or Premier?

We use Quickbooks Enterprise.  Yes we currently have shipping as a separate line item an it works great.  However our sales team believes that having it in the sale price would help sales especially for our dealers in other state.  I am recommending that we keep it as is!

Thank you for your prompt response.  We currently having shipping included in the cost of our items. (landed cost).

@droybal 

"Management is considering adding freight to the sales price of items. My concern is that this would distort our item margins.

We currently having shipping included in the cost of our items. (landed cost)."

When you say you have shipping included in the cost of your items, are you saying that you capitalize the cost of freight into the item's inventory value which is then expensed to COGS when sold?  If that's the case, then, IMO, adding freight to the item's cost (as management proposes) will give you a more accurate measure of each item's gross margin because you are comparing cost with freight included to sales with freight included.  As it stands, how do you accurately see each item's gross margin if shipping is a separate line item on the invoice and not included in the item's sale price?  Do you have multiple shipping items set up so you can attribute shipping revenue to each specific item?     

Thank you for confirming.  I do have freight charges invoiced out to our customer separately on our invoice and I think I have persuaded management to keep it this way. 

As far as landed cost go,  when we receive material and inventory parts in,  we currently add the inbound freight to the cost of the item.  Then when it is sold,  it is COGS.