We would have heard the term landed cost while dealing with Odoo. Have anyone wondered what it is and how it works in Odoo? Today we can look at what landed cost is and the inner workings of landed cost in Odoo.
Landed Cost is the total cost of a product from its transfer from the supplier to the customer's location. This can include the actual cost of the product charged by the supplier, shipping charges, taxes, handling charges, exchange rates etc. A wide variety of charges can be part of the landed cost and these all should be considered by an organization when they calculate the total cost of a product. This is a very important thing to do since failure to not calculate the actual cost of a product may lead to a decrease in revenue and which in turn leads to a decrease in profit. So how is landed cost work in Odoo and how can we properly use Odoo to calculate the total cost of a product? Let us take a look below.
We need to enable the landed cost option in our Odoo database. To do so, go to Inventory -> Configuration -> Settings and enable the Landed Costs option, or you can go to settings and search for the Landed Costs option and enable it. If you need to track the landed cost accounting entries separately, please select a default journal in the settings.
The next thing to do is to create a product which can be used as a landed cost. In Odoo, while creating a landed cost entry we need to select a landed cost product. Create a new product from the Inventory and select the product type as ‘Service’. If the product type is ‘Service’, we can see a new option under the Purchase tab called ‘Is a Landed Cost’ which should be enabled. In this case, we are creating a product called Delivery Charges.
Please keep in mind that we will be applying landed cost for products with Costing Method set as either FIFO or Average Cost and Valuation Method set as Automated.
Now create a Purchase Order for the product for which we will be applying the landed cost Delivery Charges. As you can see, we are buying 10 units of Test Product 1 for $50 apiece.
Confirm the RFQ and receive the products in your stock. Please keep a note of the cost of the product before and after receiving the product in your stock. You can see that before receiving the stock, the cost of the product is $0 and after receiving it got updated to $50.
Once this is done, we can now assign landed cost to the stock of this received product. There are two options in Odoo through which we can assign landed costs. In the first case, if the delivery charges are charged by the supplier itself, it will be mentioned in the supplier bill or the vendor bill itself. So click on Create Bill option in the purchase order and the newly created draft vendor bill, and add a new line with our landed cost product, Delivery Charges. If we add a new line with Landed Cost Product, a button will appear at the top, Create Landed Costs.
Clicking on this button will create a landed cost entry. Select a transfer, which is associated with our purchase order and click on the compute button at the bottom of the landed cost entry to see the newly calculated cost of our product, test Product 1.
As you can see from here, the value of the product will be recalculated once this landed cost is confirmed. From the below screenshot, we can see that the cost of the product has been recalculated once we confirmed the landed cost entry.
If the delivery charges are not handled by the supplier, we can create a new vendor bill and just add the delivery charges line and continue the above workflow to add the landed cost to the product.
That’s how we easily add landed cost to a product in Odoo. If you have any doubts or need help with any Odoo-related tasks or implementations, feel free to contact Hynsys Technologies.