We have large volume hardware purchases and a manual process for
Accounting for shipping In when it's on your FedEx vs vendor invoice
Answers
There are a couple of solutions:
1) You could require your purchases for product you will resell, have the vendor charge freight on the invoice (and not use your Fed Ex account number)
2) A different variation would have the vendor bury freight expense in price (probably not preferred)
3) Use a different Fed Ex number for these shipments by indicating your requirement on your purchase orders. This way the applicable Fed Ex invoice would capture all necessary freight cost that should be in inventory. I prefer option 1 as any standards you may establish would properly include freight. You may not be using standards, but if you are, you are complicating your life by having freight as a separate expense.
4) which leads to option 4, which would be develop standard costs including freight, but you will still have to measure actual purchases against these standards in order to get your costing right.
Good luck and if you have any follow ups, let me know.
1
Thank you. We try to use our account as much as possible due to the favorable pricing, however, there are a few vendors where this isn't an option. 90% of the FedEx relates to inventory and thus why I book to COGS, however, was trying to get it allocated to inventory in a relatively straight-forward way (if that was possible). All items purchased are for resale (ie we have no RM or WIP).
Anon
Based on your response to Patrick's suggestions, it seems you should try option 4. If you can determine standard freights costs by product/supplier (and that does not become a monster to maintain), then use the standard with a PPV account offset (to book actual COGS freight to).
You would then only need to split the PPV account balance at period end between P/L and B/S if it was a material difference. If it's not material, leave it in P/L.
Test your process and then figure out how to implement it.
Cheers
Len
I like Len's response on a standard for freight costs. You can always maintain an analysis on this and not hold up important costing or closing processes.
1
Thank you to those who responded. I see my weekend being invested in standard costing and how to properly account for the freight in when you don't have automated systems in place and you don't really have the bandwidth. The difficulty lies in the fact that inventory is currently maintained in
Yes, standard costing is the easiest to administer.
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