Estimated, actual and invoiced landed costs

There are three different landed cost figures to understand:

  • Estimated landed cost is the amount originally entered as the landed cost which was distributed across the purchase order items
  • Actual landed cost is the amount recorded in accounting, including any manual adjustments made.
  • Invoiced landed cost is the true amount you have been invoiced for and must pay - the actual landed cost amount in Brightpearl must be brought inline with this figure.

Understanding differences between the estimated and actual landed cost

Differences between estimated and actual landed costs occur in Brightpearl for the following reasons:

  • Under/over receiving of goods

    When landed costs are allocated, they are calculated per unit, and every unit received will be uplifted by that amount.

    So if extra items are received or fewer items are received, then that unit cost will be posted more (or fewer) times than expected.

    For example, say an order for 10 items costs £10 to ship. This works out as a landed cost of £1 per item.

    If 10 items are received, then £10 landed costs are accounted for, but if only 9 turn up then only £9 landed costs are accounted for. Similarly, if 11 turn up, £11 landed costs are accounted for.

    So even though the landed cost estimate is £10, what was actually posted to accounting may be different.

  • Landed costs are rounded per item

    Brightpearl needs to round landed costs to two decimal places for accounting, which can lead to the actual landed costs not adding back up to the original estimate.

    For example, consider the following order. Here, a landed cost of £300 is distributed across 350 items. Because the accounting for each row is rounded to two decimal places, there's an overall discrepancy between the estimated and actual landed cost of £0.01:

    PO Row SKU Qty

    Actual total landed cost of £300 distributed by qty =

    Unit cost

    Qty × unit cost =

    Total landed cost accounted for

    1 ITEM01 100 0.8571 85.71
    2 ITEM02 100 0.8571 85.71
    3 ITEM03 100 0.8571 85.71
    4 ITEM04 50 0.8571 42.86
          Total landed cost posted to accounting 299.99

Understanding differences between the actual and invoiced landed cost

Even if the estimated and actual landed cost in Brightpearl are equal, when the landed cost invoice is received you may identify differences which need to be accounted for.

Ultimately, the actual landed cost figure in Brightpearl should be equal to the amount you are invoiced. You may identify differences for the following reasons:

  • Foreign currency landed costs and exchange rate differences

    When landed costs are allocated in a foreign currency, an exchange rate is used to convert the cost into your base currency before distributing it across the items.

    When the invoice for the landed costs arrives, the exchange rate could be different, which means the charge could work out at a different amount than was accounted for.

    For example, $15 at an exchange rate of 1.5 works out at £10. If this is allocated to 10 items that’s an uplift of £1 each, and if all 10 are received then £10 landed cost is accounted for.

    When the invoice arrives for $15 and the exchange rate is 1.6 that now becomes £9.38 landed costs.

  • Estimated landed cost

    When landed costs are allocated, the allocation needs to be done early in the purchasing process so that the stock value is uplifted before they are sold. This means that estimated values may be used.

    For example, say you order 10 items and estimate that you will be charged £10 landed costs. You receive all 10 items and therefore £10 of landed costs is accounted for.

    However, when the landed cost invoice turns up, the invoice is actually for £12. This results in a £2 difference in the landed cost nominal code.

Correcting discrepancies

If discrepancies appear due to any of the above, you can enter manual journals into accounts.

The manual journals should post to the landed costs account code (normally 2070 or 2270) and then to an income statement code, possibly within the 5000 range. This will account for the difference in cost when the items sell.

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