If freight costs land in a general overhead account, your product margins are probably wrong. Many shippers and distributors can't say how much freight belongs to each item, order, or customer.
That gap creates real problems for a CFO. Pricing decisions get made on margins that look healthier than they are. Unprofitable customers or product lines stay hidden. When freight rates swing, it's hard to tell which parts of the business are absorbing the hit.
Acumatica Cloud ERP has the tools to fix this through landed cost, which adds freight, duties, and related charges to the cost of the inventory they belong to. The software alone won't correct your margins, though. Whether landed cost works depends on how it's set up during implementation.
That setup is where Concentrus comes in. As a certified Acumatica partner, we configure landed cost for distributors, manufacturers, and shippers during new implementations, and we fix setups that were misconfigured or abandoned along the way. Below is how landed cost works, where setups break down, and what it takes to get margins you can trust.
Landed cost is the total cost of getting a product into your warehouse and ready to sell. It's the purchase price plus inbound freight, duties and tariffs, customs brokerage, insurance, and handling.
When those extra costs go to overhead instead of inventory, two things go wrong. Each item's cost of goods sold reflects only the purchase price, so a bulky item that's expensive to ship looks as profitable as one that ships cheaply. And inventory is undervalued on the balance sheet, because costs that belong to unsold goods hit the income statement early.
Here's what that looks like with two products, using illustrative numbers. You buy both for $50 a unit and sell both for $80. Product A ships in a small carton, with $2 a unit in inbound freight. Product B is bulky, at $14 a unit.
|
Per unit (sale price $80) |
Product A |
Product B |
|
Purchase price |
$50 |
$50 |
|
Inbound freight |
$2 |
$14 |
|
Total landed cost |
$52 |
$64 |
|
Gross margin, freight in overhead |
37.5% |
37.5% |
|
Gross margin, freight in landed cost |
35% |
20% |
On paper the two products look identical. Once freight is included, Product B earns a little over half the margin of Product A, and you'd price, promote, and reorder them very differently.
The gap widens when freight rates or tariffs change. A product that was profitable at last year's rates may not be today, and without landed cost you won't see it until company-level margins slip.
Acumatica adds freight, duties, and other charges to the cost of received inventory, so item costs reflect what you actually paid.
You start by creating a landed cost code for each type of charge your business pays, such as ocean freight, LTL freight, customs duties, tariffs, or brokerage fees. Each code has its own allocation method and GL accounts, so the same charge is booked the same way every time.
The allocation method decides how a charge is split across the items on a receipt. Acumatica can allocate by quantity, by amount (product value), by weight, or by volume, or record the charge without adjusting inventory cost at all. The right choice follows how the cost is billed: weight-based freight by weight, container or pallet freight by volume, duties by value. One receipt can carry several codes, so freight can be split by weight while duties on the same shipment are split by value.
Landed costs are applied to the purchase receipts for the goods they relate to. Bills from carriers and customs brokers can be entered in Accounts Payable and linked to those receipts, which moves the cost into inventory instead of overhead.
Freight and customs invoices often arrive weeks after the goods. If some of that inventory has already sold by the time the landed cost is released, Acumatica applies that share to cost of goods sold so it isn't left sitting in inventory.
Acumatica has everything needed to track landed cost accurately, but each piece has to be configured around how your business buys and ships. When we see companies putting freight back into overhead after moving to Acumatica, the cause is usually the setup. These are the problems we run into most:
Each of these can be fixed, but it takes someone who understands both Acumatica's configuration and how your freight is billed. Concentrus reviews the setup, corrects the cost codes, allocation methods, GL mapping, and integrations, and onboards your finance and AP teams so the process holds up at month-end. That applies whether you're implementing Acumatica for the first time or rescuing an implementation that never delivered accurate costs.
Landed cost covers freight coming in. Outbound freight, the cost of getting orders to customers, is the other half of the margin picture.
The risk here is a gap between what you charge customers for shipping and what shipping costs you. Free-shipping thresholds, flat-rate shipping, expedited orders, and accessorials like liftgate or residential delivery can turn a profitable order into a loss.
Acumatica records freight cost against shipments and sales orders next to the freight amount billed to the customer. With both numbers in the ERP, finance can see which customers cost the most to serve once freight is included, whether shipping charges and free-shipping thresholds cover actual costs, and which regions, order sizes, or shipping methods cut into margin the most.
Acumatica can only report true margins if the freight numbers going into it are complete. That's hard when freight costs arrive through carrier portals, emailed invoices, and spreadsheets, then get keyed in by hand weeks later.
A transportation management system (TMS) connected to Acumatica closes that gap. FreightPOP, for example, has a two-way Acumatica integration. Orders flow from Acumatica into FreightPOP for rate shopping and booking, and actual freight cost, carrier, ship date, and tracking numbers are written back to Acumatica automatically . The integration still has to be mapped correctly during setup, so shipment costs post to the right orders and accounts.
For finance, that means:
What is Acumatica? Acumatica is a cloud-based ERP (enterprise resource planning) system for small and midsize businesses. It covers financials, inventory, purchasing, order management, and reporting in one platform.
What is landed cost? Landed cost is the full cost of getting a product into your warehouse: the purchase price plus freight, duties, tariffs, brokerage, insurance, and handling.
Why should freight be included in inventory cost? It makes cost of goods sold and gross margin by product accurate. When freight is expensed to overhead, margins on expensive-to-ship items look better than they are and inventory is undervalued.
Does Acumatica support landed costs? Yes. Acumatica uses landed cost codes to add freight, duties, and other charges to received inventory, allocated by quantity, amount, weight, or volume.
Why isn't landed cost working in our Acumatica system? Common causes are cost codes or allocation methods that don't match how freight is billed, incorrect GL mapping, carrier bills that aren't linked to purchase receipts, or an unfinished TMS integration. An Acumatica partner like Concentrus can review the setup and correct it.
How does a TMS improve margin reporting in Acumatica? A TMS like FreightPOP writes actual freight costs and tracking back to Acumatica automatically, so finance works from complete freight data instead of manual entry.
Acumatica gives you the tools to see true margins, and the implementation decides whether you get there. Landed cost codes, allocation methods, GL mapping, and integrations all need to be configured around how your business actually buys and ships.
Concentrus is a certified Acumatica value-added reseller and consulting firm. We help distributors, manufacturers, and shippers set up Acumatica correctly from the start, and we help companies whose implementations stalled or never produced accurate costing get back on track. If freight is still sitting in overhead in your Acumatica system, talk to Concentrus about a landed cost review.