Ever wonder why your profit margins don’t look as healthy as you expected? You’re not alone.
Businesses often get tripped up by landed costs—those sneaky expenses that pile up when you order stock. If you’re looking at your supplier’s price and ignoring shipping, duties, and other fees, you’re literally selling yourself short.
What Does Landed Cost Mean?
Simply put, a landed cost is the true cost of an item after factoring in additional expenses beyond the supplier’s price. While a supplier might quote you $2 for a product, the landed cost could easily be $4 once you include things like:
- Shipping and freight charges
- Customs duties and import taxes
- Currency conversion fees
- Restocking fees
- Other handling or related expenses
It gives you the complete picture of what a product actually costs you to land products in your workshop or warehouse.
Is Landed Cost Important?
You might be wondering, “Why does this matter?”. And the answer is that if you do, you might be misjudging your profits if you’re not accounting for extra costs like shipping, taxes, and fees.
For businesses dealing with physical products or logistics, this can mean losing money without realising it. But even if your operations are simpler, tracking landed costs helps. It ensures financial accuracy and shows your profitability.
1. Accurate Profit Margins
If you’re not accounting for landed costs, you think you’re making a profit when, realistically, you’re losing money. Let’s say you sell widget A for $3 because you thought it cost $2. But if the true landed cost is $3.50, you lose 50 cents every time you sell one. Multiply that over hundreds or thousands of units, and you can see how this mistake adds up quickly.
Pro Tip: Use WorkGuru to automatically factor in all landed costs when receiving stock. This ensures you’re always working with the real cost of your products—no spreadsheets required!
2. Better Pricing Decisions
Accurate costs mean accurate pricing. If you don’t know your true costs, you’re either underpricing (and losing money) or overpricing (and losing customers). Whether you’re invoicing clients or allocating materials to a project, you need to ensure you’re covering all costs, not just the base price.
Example: Let’s say you import parts to build trailers. By tracking landed costs, you know exactly how much each part costs after shipping and duties. That means you can confidently mark up your product, knowing you’re making a healthy margin without accidentally overcharging.
How are landed costs calculated?
Landed costs are all about finding the true price of your stock by factoring in additional expenses. Here’s a simple example:
- Supplier Cost: Your supplier charges $2 per unit for 100 units.
- Shipping: Freight costs $100 for 100 units = $1 per unit.
- Customs Duties: Import taxes add $150 for the shipment = $1.50 per unit.
Landed Cost Per Unit = $2 (supplier) + $1 (shipping) + $1.50 (customs) = $4.50
This means your real cost per unit is $4.50—not $2. Skipping these calculations could leave you underpricing and losing money.
Pro Tip: WorkGuru automates this process. How? It links invoices and divides costs across units, so you always know the actual numbers without lifting a finger.
This calculation lets you set prices and allocate costs with confidence. It prevents underestimating your expenses.
How WorkGuru Makes Landed Costs Easy
Tracking landed costs manually on spreadsheets is slow and prone to errors. WorkGuru removes the hassle, making the process simple and accurate:
Add Costs Directly to Your Purchase Orders
With WorkGuru, you can include all additional expenses—like shipping, duties, or handling fees—right on the
same purchase order as your stock. No separate tracking or double entry is required.
Link Separate Invoices
Do you have a separate invoice for freight or customs? No problem. WorkGuru lets you link those costs directly to your original purchase order. This way, all expenses are tracked in one place.
Automatic Cost Breakdown
WorkGuru automatically spreads additional costs across your stock based on quantity and value.
Here’s an example:
- You order 100 widgets at $2 each ($200 total).
- Shipping adds $100.
- WorkGuru calculates $100÷100 units = $1 per unit for shipping.
- The total cost of the product is now $3 per unit.
No manual calculations, no stress—just accurate landed costs every time.
Pro Tip: WorkGuru allocates costs proportionally based on item value. Higher-value products absorb more of the extra costs. This ensures your reports are precise and your profits are spot on.
Currency Conversion? Sorted.
WorkGuru converts foreign currency costs into your base currency without any manual input. Whether you’re buying in USD, EUR, or GBP, the system handles it for you.
With WorkGuru, all the data stays in one place. Landed costs are built into your purchasing workflow. So you don’t need to input them manually into a messy spreadsheet.
A Quick Recap: Why You Should Track Landed Costs
- Accurate Margins: Know your true costs to avoid losing money.
- Smarter Pricing: Set prices confidently to protect your profit margins.
- Better Reporting: Make decisions based on real numbers, not guesses.
Landed costs seem like small detail, but they can make or break your margins. By tracking them properly, you’ll get a clear picture of your profitability. You’ll make better pricing decisions and avoid surprises later.
With WorkGuru, it’s easy to manage landed costs, link invoices, and ensure everything adds up—accurately and automatically.
