Transportation and overhead costs: how to correctly add logistics to the cost price

How to account for delivery, discounts, and additional expenses in a goods receipt invoice

If you need to account for delivery, packaging, a discount, or other additional expenses when goods are received, in Torgsoft this is done in the goods receipt invoice on the «Invoice Expenses» tab. It is important not only to enter the amount but also to choose the correct accounting method, because this determines whether the debt to the supplier, the cost of goods in stock, and the final retail price will increase.

The program allows you to distribute these expenses very flexibly, clearly separating the money you owe to the supplier, the amounts that increase the value of your warehouse stock (cost), and the expenses that you simply want to include in the final price for the buyer.

Types of expenses in a goods receipt invoice

Invoice expenses are divided into three main types:

1. Financial expenses — these are expenses that will be recorded in the program as a separate payment (financial document) through the cash desk or bank account. They proportionally increase the retail price of the goods.

2. Expenses as % of the invoice — expenses or discounts calculated as a percentage.

3. Expenses in currency — additional amounts expressed in national or foreign currency converted into the national currency.

Expense distribution: supplier balance vs. cost vs. retail price

When adding any expense as a % or in currency (for example, delivery cost), you need to specify the Accounting Type of additional expenses. This setting determines what the logistics will affect.

1. Include in mutual settlements with the supplier

If you select this option, the expense amount is added to your debt to the supplier, included in the total cost of goods, and displayed in the «Purchase Price» column.

• When to use? This setting is used if transport expenses or packaging are provided by the supplier and the supplier adds this amount to the total invoice for the goods.

2. Include in the cost of goods (Additional Cost) 

The expense is included in the cost of goods when it is calculated and is recorded in a separate «Additional Cost» column, but it does not affect the balance with the supplier.

• When to use? It is suitable for paying for third-party carrier services (for example, Nova Poshta or a hired driver). You do not owe this money to the goods supplier, but you spent it on delivery, so the value of your stock in the warehouse increases.

3. Do not include (Additional Purchase Value) 

The expense is not included either in mutual settlements with the supplier or in the cost of goods (the value of your warehouse stock does not increase). This amount is recorded in the «Additional Purchase Value» column and affects only the calculation of the final retail (or wholesale) price of the goods, proportionally increasing it.

• When to use? When you want to «pass on» the cost of delivery or packaging to the buyer by including it in the retail price, but do not want to artificially inflate the estimated value of your warehouse stock in reports.

Price calculation algorithm with logistics included

To correctly understand pricing, you should know the sequence in which the program applies expenses:

1. First, VAT is added to the base purchase price (if applicable), and then invoice discounts are deducted.

2. The expenses included in mutual settlements with the supplier are added to the resulting amount.

3. Next, the Additional Cost is calculated (logistics provided by third-party companies). Percentages or amounts are added to the purchase price obtained in the previous step.

4. Finally, the Additional Purchase Value is calculated (expenses that affect only retail).

5. The retail (wholesale) price is formed by adding the Supplier Price, Additional Cost, and Additional Purchase Value, after which the trade markup percentage is applied to this total base.

Analytics of logistics expenses

To later check what exactly the price of a specific product consists of, use the «Product Accounting Price Analysis» report (Analysis menu). In this report, you will see a detailed breakdown:

• The purchase price from the supplier.

• The amount of additional cost.

• The amount of additional purchase value.

• Details of financial expenses, such as: transport expenses, bank services, price tags, and other expenses. This allows you to always understand how much real money was spent to get the goods onto the shelf of your store.