Manual Landed Cost Calculation
The staff of an importer/distributor of food ingredients is working on a year-end close. Their manual cost calculation “system” involves the Accounts Payable staff entering the payables into their standard accounting system before passing the invoice to an assistant/admin in the sales department. That person (sometimes assisted by the company’s receptionist) enters costs related to each shipment into a spreadsheet.
In theory, they get an accurate landed cost, though it often takes months for the data to wind it's way through the process.
The team has had two very significant and recurring problems with this method. There have been several occasions where they’ve reordered, imported, and sold a product before they knew their true cost. Because they assumed the cost was lower than it eventually turned out to be, the goods were under-priced both times.
The second major problem arose when they discovered that significant data entry errors in cost entry during Q1 resulted in the under-pricing of several of their key products.
Two different problems resulting in the same outcome: Profits they expected are simply not there.
The VISCO Chem Solution
Perhaps the most crucial information for any importer to possess is accurate landed cost. Due to its complexity, this is also the most challenging aspect of the typical importer’s business. It is certainly possible to track costs shipment by shipment, entering each cost into a spreadsheet to produce an exact landed cost; but even the companies willing to go to these lengths are still open to human error as that data is transferred into the accounting system.
VISCO Chem eliminates the danger of double entry by allowing costs to be entered one time in VISCO Chem before being automatically dumped into the accounting system. But the elimination of double entry is just a small part of the power of VISCO Chem. VISCO Chem also allows accruals of estimated costs, so users do not have to wait until they receive an invoice to put these anticipated costs in the mix. As each cost is entered, VISCO dynamically generates a “Latest Projected Cost” using these figures. As estimates are replaced with actual costs, the latest projected cost becomes increasingly more accurate.
But VISCO Chem doesn’t stop there. No matter what your method of inventory allocation, VISCO always knows what inventory was matched with any given sales order. And because we know the exact landed cost of that inventory, we can calculate an exact cost of sales to be matched against the sale price. That provides exact profitability at the purchase order shipment (or venture) level.