How to Work with Additional Costs in the Purchase Orders

When a retailer makes purchases, very often there are other expenses besides the amount of the ordered items. It can be the expenses for shipping, packaging, customs fees, and others. Thus, the total cost of goods can be higher than indicated in the order to the supplier. 

The possibility to specify additional costs in a purchase order allows you to take them into account in the final cost of goods and, therefore, obtain more accurate business profitability indicators.

Open the saved purchase order to edit or create a new one. Click ‘Add additional costs’ at the bottom of the order.

Click ‘Add additional costs’

Fill in the ‘Additional cost’ name and ‘Amount’. The amount can also be a negative value, in case you receive a discount from your supplier. Click on the ‘+ Add additional cost’ button to add a new line for additional costs. 

‘Additional cost’ name and ‘Amount’

After saving or creating the Purchase order, you will see the additional cost section in the details of your purchase order with the amount added to the items amount to calculate the ‘Total’ of the order.

additional costs in the purchase order details

During the confirmation of receiving a purchase order, you can select which additional costs to take into account in the cost of the received items.

select which additional costs to take into account

If you partially receive an order, you can apply the additional costs to only some of the items from the purchase order. In this case, the additional cost will be taken into account in the purchase price calculation of the selected item.  

If you have no more items left and have unselected additional costs in the order, you will get the notification that all unreceived additional costs will be canceled. Confirm your choice to proceed.

Confirm your choice

The unreceived additional costs will be marked as canceled in the received purchase order details. 

unreceived additional costs will be marked

After you have received the purchase order, the system calculates a new weighted Average cost for each item, taking into account the selected additional costs, in order to provide a more accurate calculation of the Total inventory value and Potential profit indicators in the ‘Inventory valuation’ report.

The total amount of the selected additional costs is distributed over all received items in proportion to the purchase cost of each item received in the order.

The final purchase cost of an item in an order, taking into account additional costs Cfinal, will be calculated like this:

The final purchase cost of an item

C1 - purchase cost of the received item
Costs - the total amount of the selected additional costs when receiving the purchase order
Subtotal -  the total values of all items received in the order (without additional costs)


See also:

Advanced Inventory Management Overview

How to Work with Purchase Orders and Suppliers

How to Work with Transfer Orders

How to Work with Stock Adjustments

Inventory History and Valuation Report

How to Work with Inventory Count

How to Print Labels for Items