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AutoCount - Landing Cost Module

How AutoCount Landing Cost Module Improves Inventory Costing

Effective inventory management hinges on accurately accounting for all costs involved in bringing products to market. The AutoCount Landing Cost Module simplifies this by enabling businesses to allocate costs such as shipping fees and import duties to their inventory, ensuring precise valuation. This article delves into the concept of landing cost, its importance, and how AutoCount enhances cost management for import-heavy businesses.

What is Landing Cost and Why Does It Matter?

Landing cost refers to the comprehensive expense of acquiring inventory, including the purchase price, shipping, import duties, and other associated costs. Accurately calculating and allocating these costs is essential for:

  • Realistic Profit Margins

    Avoid underpricing or overpricing by considering all incurred expenses.

  • Accurate Inventory Valuation

    Ensure that your stock’s value reflects its true cost.

For example, if you import goods for RM1,000 with an additional RM100 for shipping and import duties, the total cost (landing cost) becomes RM1,100. Without including the RM100, profit margins and financial reports may be misleading.

How AutoCount Simplifies Landing Cost Allocation

AutoCount’s Landing Cost Module is designed to handle the complexities of cost distribution with precision and flexibility. It supports multiple allocation methods and integrates seamlessly with the accounting system, ensuring accurate financial reporting.

Key Allocation Methods

By Subtotal

Costs are divided based on the item’s price as a percentage of the total order value.

By Weight

Shipping fees and other costs are distributed based on the weight of each item.

By Volume

Allocates costs according to the physical size of each item.

How to Use AutoCount Landing Cost Module

Step 1: Setting Up default method

Enable the Landing Cost Module in AutoCount by navigating to Tools > Program Control > Module Settings. Ensure that the appropriate default method are created under Cost of Goods Sold to track adjustments.

Ensuring shipping charges are included under Cost of Goods Sold.

Step 2: Input Purchase Invoices

Enter details such as quantities and unit prices for imported items in a new purchase invoice. Save the invoice to establish the subtotal.

Entering quantities and unit prices for imported items in a purchase invoice in AutoCount to establish the subtotal

Step 3: Apply Landing Costs

Click on the “Landed Cost” option within the purchase invoice screen. Input shipping fees and other expenses. The module automatically allocates these costs based on the selected method (subtotal, weight, or volume).

"Clicking the 'Landed Cost' option in AutoCount to input shipping fees and allocate costs based on selected methods like subtotal, weight, or volume.

Step 4: Validate Adjusted Costs

Check the updated unit costs for each item in the stock reports or through Stock Balance Reports. These values now reflect the true cost of inventory, including landing costs.

Reviewing updated unit costs in AutoCount stock reports to reflect true inventory cost, including landing costs.

Example: Landing Cost Allocation by Subtotal

Consider a scenario where your purchase includes:

  • Item A: RM500 (50% of the total order).
  • Item B: RM100 (10% of the total order).
  • Item C: RM400 (40% of the total order).

If the total shipping fee is RM100:

  • Item A is allocated RM50 (50% of RM100).
  • Item B is allocated RM10 (10% of RM100).
  • Item C is allocated RM40 (40% of RM100).

The unit cost for each item is then recalculated, reflecting its proportion of the total landing cost.

Example of autocount landing costs allocation

Why Landing Cost is Essential for Business Success

Inventory Costs vs. Expenses

In accounting, Landing Cost helps accurately reflect the true cost of inventory:

  • Suppose the purchase amount is RM1,000, and shipping costs and import duties are RM100.
  • When calculating inventory, the Closing Stock includes the RM100 shipping cost, totaling RM1,100.
  • With no sales (Sales = RM0), the net profit (Net Profit) is RM0, indicating no profit or loss.

By including shipping costs in inventory costs, the actual cost of goods is better represented. This ensures that the company’s profitability is accurately reflected only when actual sales occur.

Recording shipping costs as inventory costs

Another approach is recording shipping costs as an Expense:

  • Suppose the purchase amount is RM1,000, but the RM100 shipping cost is classified as an Expense rather than part of inventory costs.
  • While the Closing Stock remains RM1,100, the shipping cost appears under expenses.
  • In this case, the Net Profit is still RM0, giving the impression that there is no profit or loss.

However, recording shipping costs as inventory costs (using the Landing Cost Module) provides a more accurate representation of the actual cost of goods. This allows businesses to better understand profitability in relation to costs when sales occur, enhancing the accuracy of financial reporting and decision-making.

Recording shipping costs as expenses

Advanced Features of AutoCount Landing Cost Module

Multi-Currency Support

AutoCount simplifies transactions in multiple currencies, automatically adjusting for exchange rates during cost calculations.

Automation of Import Duties

Set default duty rates for items to automate cost calculations, saving time and improving accuracy.

Customization Options

While the module supports subtotal, weight, and volume allocations, businesses needing additional methods (e.g., quantity-based allocation) can request customizations.

Challenges Without the Landing Cost Module

Without the module, businesses risk:

  • Inaccurate Profit Margins

    Failure to account for all costs can lead to underpricing or overpricing.

  • Misleading Financial Reports

    Separate tracking of shipping and duties as expenses can distort profit and loss statements.

  • Time-Consuming Manual Calculations

    Allocating costs without automation increases the likelihood of errors.

The AutoCount Landing Cost Module resolves these challenges by automating and integrating cost distribution into the inventory system.

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Conclusion

The AutoCount Landing Cost Module is a vital tool for businesses aiming to maintain accurate inventory valuations and financial reporting. By automating cost allocation and supporting flexible methods, it saves time and ensures financial accuracy.

Whether your priority is precision, efficiency, or enhanced profitability, AutoCount’s Landing Cost Module is the solution you need. Ready to streamline your inventory costing? Explore AutoCount today and experience the benefits firsthand!

FAQs

Landing cost refers to the total expense of acquiring inventory. It plays a crucial role in ensuring accurate profit margins and valuation.

By default, AutoCount does not support quantity-based allocation, but you can request customizations to suit your needs.

AutoCount offers three allocation methods:

  • By Subtotal: Allocates costs based on the item’s proportion of the total purchase.
  • By Weight: Distributes costs based on the weight of each item.
  • By Volume: Allocates costs according to the item’s volume.

Yes, AutoCount handles multi-currency transactions and adjusts costs based on the current exchange rates.

Including shipping and import fees in inventory costs ensures more accurate profit and loss reports, offering better financial insights.

Without using the module, you may record shipping and import costs as expenses, which can lead to inaccurate profit margins and undervalued inventory.

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