Additional costs when purchasing: how to add shipping costs and commission to the price of the product

Accounting for additional procurement costs: how not to lose profit because of logistics and commissions

Successful trade starts with proper pricing. Every entrepreneur knows that the price of goods listed in the supplier’s price list is far from the final cost of the products. Delivery costs (logistics), bank transfer fees, packaging costs, label printing, and more are added to it. If these related expenses are not taken into account or are accounted for incorrectly, the store’s actual profit will be significantly lower than expected.

Torgsoft allows you to account for all overhead costs during goods receipt, automatically distributing them into cost price and retail price.

Types of overhead costs in Torgsoft

All additional costs for a batch of goods are entered directly during goods receipt (mode «Document» — «Goods Receipt») on the «Overhead Costs» tab. The program divides them into three main types:

1. Financial overhead costs are amounts that you pay separately (through the cash desk or bank account). For example, payment for «Nova Poshta» services or payment for loaders. They proportionally increase the retail price of the goods.

2. Costs in % (taxes, discounts) are calculated as a percentage of the invoice amount.

3. Costs for goods in foreign currency are used for specific calculations in foreign currency.

How costs affect accounting

When adding any expense, for example a financial one, the user must specify exactly how this expense should affect accounting. There are three options:

• Include in the cost price of the goods. The expense will be shown in the «Additional Cost Price» column and will increase the total cost price of your warehouse stock. For example, you purchased a batch of clothing and spent money on hangers and labels for it. These expenses are included in the cost price so that, as the goods are sold, the costs of their procurement are recovered.

• Do not include in the cost price. Such expenses are shown in the «Additional Purchase Cost» column. They do not increase the warehouse cost price of the goods (are not capitalized), but they directly affect the retail price calculation by increasing it so that you can pass these costs on to the customer.

• Include in settlements with the supplier. This option is used if, for example, transportation costs or a commission are covered by the supplier and added to your total debt under the invoice. This amount will be included both in the debt to the supplier and in the cost price of the goods.

Cost allocation and final price calculation

After an expense is created, it must be allocated across the goods in the invoice. For this, the action «Allocate the expense across invoice goods» is used. Torgsoft allows you to allocate expenses automatically (in proportion to the quantity of goods and their price) or manually (specify the exact markup amount for each item separately).

After entering all goods and allocating the expenses, you need to click the «Recalculate prices in the invoice» button. Thanks to this, the program algorithm will recalculate supplier prices, add the additional cost price or additional purchase cost to them and, after applying your markup percentage, will form new, mathematically correct retail prices. The selling price is formed according to the following logic: purchase price + additional costs + VAT (if any) + markup.

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