All about Landed Cost Formula

Just how much are you spending on importation? Is it worth it?

Starting a manufacturing or retail business can be tricky. You need to consider where you source your raw material supplies (manufacturing) and ready-for-sale products (retail). Clients who source materials from a different part of the globe are called Importers. They may experience miscalculation of pricing of goods the first time around because of improper cost accounting. As an importer, you should know that the cost of materials you buy is not the only amount you pay. There are other charges you may not know of yet. This is where the Landed Cost Formula comes in.

What is Landed Cost Formula?

In a nutshell, Landed Cost Formula is the full amount you spend per imported good or material. This takes into account the following: Price of Imported Good, Freight Costs, Insurance, Storage Costs, Customs Duty, Tax, Customs Clearance, and more.

Clothing Manufacturing Business

Let’s say you are a clothing manufacturing business and you need to source out raw materials from China. You will definitely need cloth, sewing materials, and the like. If you check out your supplier’s prices, they seem reasonable. However, because that is not the only money you cash out upon delivery, it is important for you to understand other expenses you will be paying. Your Chinese supplier may not know the Customs Duties and Taxes in your state, so you may talk to your customs department for more information.

How Do I Calculate my True Landed Cost?

There are some clients who complain that they only get to know how much they really spent long after their shipments have arrived. Factors like foreign exchange rates, additional customs payments, and FOB can destroy your initial costing. This is why you need to have a clear idea of all costs you may be incurring and use estimates in your computations. To make smarter decisions, Enterprise Resource Planning (ERP) Software is readily available to help you do just that and focus on running your business instead of worrying about cost accounting.

How ERP Consulting LLC Can Help

ERP Consulting LLC has a dynamic knowledge on different businesses that plan to operate with global connections. We help to install Microsoft Dynamics GP in Pataskala Ohio so you can better choose which materials to source for your products. Our firm also offers support and after-sale services so you need not worry about improper guidance. Check out our Web site for more information at erpconsultingllc.com or give us a call at 614-342-0098.

Microsoft Dynamics GP will help you gain better control on all aspects of your business. This includes management of costs, inventory, accounting, human resources, customer relationship management, and more. Call us today and take the next step to your business’ growth!

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