If you import goods, the price on the supplier invoice is only part of what a unit actually costs you. Freight, insurance, customs duty, brokerage, and port fees can add a meaningful percentage on top, and if those costs are expensed separately instead of attached to the product, your margins will look better on paper than they are in reality. Landed cost accounting fixes that by rolling every cost of getting a product to your door into its true unit cost.
What counts as landed cost
Landed cost is the total cost of a product once it has arrived and is ready to sell. Alongside the supplier price, it typically includes:
- Inbound freight and shipping
- Customs duties and import taxes
- Insurance in transit
- Brokerage, port, and handling fees
These are allocated across the units in a shipment, usually by value, weight, or quantity, so each unit carries its fair share.
Why it matters
When freight and duty sit in separate expense accounts, your gross margin looks inflated and your inventory is understated on the balance sheet. That distortion drives bad decisions: underpricing products, misreading which lines are profitable, and presenting financials that a lender or investor will question. With landed cost baked into inventory, gross margin reflects what you truly make, and your balance sheet shows the real value of stock on hand.
Getting it right
Good landed cost accounting means capturing freight and duty against the specific shipment, choosing a consistent allocation basis, and posting the costs to inventory rather than straight to expense. It pairs naturally with FIFO or weighted-average costing, so as units sell, the correct fully-loaded cost flows into cost of goods sold.
Landed cost and inventory costing are part of the work we do for product and distribution clients. If your margins feel better than your bank balance suggests, let's talk.
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