Landed cost on Shopify purchase orders

How it works#

A supplier's price is rarely what a unit costs you. Freight, customs duty and handling fees all land on top. In Binly you add those as costs on the purchase order. Each cost has a kind (freight, duty, discount or other) and an amount, and a discount is a negative amount.

Binly splits the total across the order's lines in proportion to what each line costs, or in proportion to units if you prefer. The supplier's own price on each line never changes. The landed unit cost is the supplier total for the line plus its share of the costs, divided by the quantity ordered.

A worked example#

These numbers are made up to show the maths. A purchase order has two lines, and the supplier invoice adds $140 of freight and $70 of duty, $210 in all.

Value is the default because freight and duty usually follow what the goods are worth. Split by quantity suits cases of near-identical items. Binly does not offer a weight split, because it does not store variant weights, and a guessed weight gives a worse answer than an honest value split.

What Binly writes to Shopify#

At receiving, Binly writes each item's cost to Shopify. With the default last-cost method, the new landed cost replaces the old one. If you switch on weighted average cost, which is also part of Pro, Binly blends the landed cost of what arrived with the stock you already hold, weighted by quantity.

Partial deliveries work the same way, one receipt at a time. If you change a cost or the split rule after some lines have arrived, an Update costs in Shopify button writes the new landed cost to the lines already received. That button is for last-cost mode only, because re-pushing under weighted average would overwrite the average.

Tax and currency#

Sales tax such as VAT or GST sits beside the order and stays out of unit cost, landed cost and margin. Most businesses reclaim it, and folding it in would make every margin look lower than it is.

If a supplier invoices in another currency, you set the exchange rate on the order. Binly never fetches or refreshes a rate, so the rate you agreed is the rate the order keeps, and you can tick the order off against the supplier's invoice in their currency.

When the invoice arrives late#

Sometimes the supplier invoice lands after you received the goods, and it comes in over the order. Binly flags the gap. Part of that delivery has often sold already, so Binly splits the extra cost into two parts: the share that belongs to stock still on hand, and the share that belongs to units already sold.

The on-hand share suggests a new unit cost for the remaining stock. The sold share is booked as a dated cost-of-goods-sold true-up in the current period, and the order page shows how much margin on those sold units was overstated. Today Binly records the split and suggests the new cost. It does not write the correction to Shopify for you. The month-end pack on Growth lists these true-ups on their own line.

What it does not do#

• It does not split by weight.
• It does not look up duty rates. You enter the amounts from your paperwork.
• It does not track lots, so a late correction treats units from one receipt as interchangeable.

Which plan#

Landed cost and weighted average cost are on Pro, $25 a month with a 14-day trial. Purchase orders and receiving start on Starter at $12. Growth, at $69, adds supplier price lists, early-pay savings and the month-end COGS pack. Details are on Binly on the Shopify App Store.

For context, Stockroom by MyWorks is a free app that lists landed cost tracking at receiving. Shopify's own purchase orders can also carry cost adjustments for shipping and duty, and our receiving article covers what Shopify's help page does and does not say about the Cost per item field.

Keep reading#

• Landed cost per unit, with a full worked example
• Weighted average cost against FIFO in Shopify
• What a supplier price rise does to margin
• Binly as a Shopify purchase order app
• Receive purchase orders by scanning