Landed Cost
Landed Cost refers to the total cost of acquiring a product, which includes its purchase price and additional expenses such as
shipping,
insurance, customs duties, handling fees, and
taxes. In Odoo, the Landed Costs feature ensures that these expenses are accounted for in the product’s valuation, providing a more accurate reflection of inventory costs. Businesses dealing with intricate supply chains, frequent shipments, or foreign suppliers find this function especially helpful.
How to Enable Landed Costs in Odoo
Before using landed costs, the feature must be enabled in the
Inventory module. To do this, users must navigate to
Inventory → Configuration → Settings and scroll to the Valuation section. There, they must check the Landed Costs option and save the changes. Once the page refreshes, a Default Journal field appears, where users can select the
accounting journal in which all landed cost entries will be recorded. This step ensures that all additional expenses are correctly tracked in the financial records.
How to Create a Landed Cost Product
For charges that are frequently added as landed costs, such as international shipping fees or import duties, Odoo allows users to create a landed-cost product. As a result, these expenses no longer need to be manually entered each time a new
vendor bill is generated. To set up a landed cost product, users must go to
Inventory → Products → Products, click New, and assign a relevant name to the product, such as "Freight Charges" or "Customs Fees." In the Product Type field, they must select Service, as landed costs can only be applied to service-type products.
Users should then select the Vendor Bills section and check the box labeled "Is a Landed Cost" under the Purchase tab. When this option is chosen, the Default Split Method field is displayed. This establishes how the purchased goods will be allocated to the landed expenses.
Five allocation techniques are available in Odoo:
* Equal, where the cost is divided equally across all received products.
* By Quantity, where the cost is distributed based on the number of units.
* By Current Cost, where the landed cost is assigned proportionally, with higher-cost products receiving a larger share.
* By Weight, costs are assigned based on the weight of each commodity.
* By Volume, where costs are distributed according to the product’s volume.
How to Apply Landed Costs to Purchases
To apply a landed cost, users must first create a Purchase Order (PO) in the
Purchase app and confirm it. Once the vendor delivers the products, users should navigate to
Inventory → Operations → Transfers to validate the receipt. After the products have been received, the vendor bill can be created by clicking Create Bill from the
purchase order.
At this stage, the landed cost product that was created earlier should be added as a new invoice line in the vendor bill. After saving the changes, a checkbox appears in the Landed Costs column. While the main product does not have this box checked, the landed cost product does, clearly distinguishing these costs from regular product purchases.
How to Process Landed Costs
Once a landed cost is included in a vendor bill, a button labeled Create Landed Costs appears at the top of the screen. Clicking this button generates a landed cost record, which must be linked to the relevant stock transfer (receipt). Users then need to click Compute, which distributes the landed costs based on the selected method.
The Valuation Adjustments tab provides a breakdown of how the landed cost affects product valuation. It displays the original cost of the products, the additional landed costs applied, and the updated total cost. Once reviewed, click Validate to post the landed cost entry to the selected accounting journal.
How to Track Landed Costs in Odoo
Landed costs are only applicable to products that employ FIFO (First-In-First-Out) or AVCO (Average Cost) as their costing technique. The valuation method for these products can be either manual or automatic, depending on the company’s inventory configuration.
To monitor how landed costs impact inventory valuation, users can navigate to
Inventory → Reporting → Valuation, where they will find a detailed report of all product values, including landed costs. Additionally, all journal entries related to landed costs can be accessed in the
Accounting app by going to
Accounting → Accounting → Journal Entries.
What are the Benefits of Using Landed Costs in Odoo
By using the Landed Costs feature in Odoo, businesses can ensure that their inventory costs are accurate and reflect the true expenses of acquiring products. This improves financial reporting, profitability analysis, and overall cost management. Having precise landed cost calculations helps businesses make informed pricing decisions, maintain better profit margins, and optimize their purchasing and supply chain strategies.