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Logistics Accounting
Overview
This chapter begins with an introduction to Logistics Accounting, including definitions and an overview of the process. The introductory section also discusses the business benefits of Logistics Accounting.
The setup section outlines the steps involved in setting up inbound and outbound Logistics Accounting, before reviewing how logistics charges are accrued and processed in the system, and which reporting capabilities are available.
Definitions
Logistics costs are those incurred when a product is moved from one location to another. These costs can include, not only the freight charges paid to carriers, but also insurance, duty, customs clearance, handling charges, and so on. Depending on the freight terms, these costs can be paid by the supplier and recharged to the customer within the item price or as a trailer charge. The costs can also be paid by the customer directly to the carrier, insurer, or customs.
The individual costs payable to third-party suppliers for the transportation of goods are referred to as logistics charges. Logistics Accounting lets you define logistics charges for any inbound and outbound transportation costs payable to third-party suppliers.
Inbound versus Outbound Logistics
Inbound logistics charges are the transportation costs associated with purchasing items from external suppliers. The system then automatically creates a pending invoice for the charges during purchase receipts. During purchase receipts, the system determines which logistics charges to accrue, based on the terms of trade assigned to the order supplier.
The system then creates pending invoice records and receivers for each purchase order line.
Outbound logistics charges relate to the transportation costs incurred when you ship items to customers or to other company locations. Outbound logistics charges include the cost of freight only. Normally, outbound logistics charges result from the sales order and distribution order processes, and accrue when the items are shipped. In order to accrue outbound logistics charges, you must first define freight charge data and freight terms, and then associate the freight terms with the customer.
Logistics Charge Accruals Process
GL accruals for inbound logistics charges are triggered by purchase order receipts. GL accruals for outbound logistics charges are triggered by shipments.
For each receipt or shipment, a pending invoice is created for each logistics charge accrual. Inbound logistics charges are built into the GL cost for items.
The above process flow summarizes the steps involved in accruing logistics charges
Logistics Charge Accruals Process Highlights
Pending invoices for logistics charges are created automatically during purchase order receipts, and sales or distribution order shipments. Logistics charge accruals are also referred to as pending invoices. During receiver matching, you can match the amounts from pending invoices to actual invoice amounts. The more information provided on the pending invoice, such as the supplier of the logistics charge, the easier it is to match it to an invoice.
When purchased items are shipped from an item supplier, you might not know the name of the logistics supplier until the goods arrive. Logistics charges can accrue without specifying a logistics supplier. After an invoice arrives, you can define the logistics supplier on the pending invoice using Logistics Charge Pending Invoice Maintenance (2.15.7). During receiver matching, it is easier to match invoice amounts to pending invoices when logistics suppliers are assigned.
Each pending invoice includes an internal reference and, optionally, an external reference. An internal reference is a code that identifies a shipment or receipt created by the system, such as a receiver number or shipper ID. An external reference is an identifier supplied by a third-party logistics supplier, such as a bill of lading number, carrier tracking number, or packing slip number. During receiver matching, use internal and external references to help match invoices from logistics suppliers to pending invoices.
When Logistics Accounting is enabled, additional fields and frames display in several screens. These fields are described in User Guide: QAD Master Data, which contains detailed information on Logistics Accounting.
Benefits
As manufacturing companies increasingly look for cheaper materials and components from remote sources, logistics costs have become a more significant aspect of cost management. The availability of accurate product and customer profitability information, including the total cost of purchasing or selling items, enables companies to maker better pricing and financial analysis decisions.
Logistics Accounting lets you define logistics charges for any inbound and outbound transportation costs payable to third-party suppliers.
Inbound logistics charges are the transportation costs associated with purchasing items from external suppliers. Outbound logistics charges are the transportation costs associated with the shipment of items from a company location to customers or other company locations.
For some companies, a significant proportion of purchases are imports. Logistics costs have a large financial impact since they can represent a high percentage of the total delivered cost and must be included in price comparisons with local sources. In Logistics Accounting, inbound logistics charges are considered part of the overall cost specific to each item and included in the item cost.
For other companies, the shipment of goods by third-party carriers is a frequently occurring expense. Tracking the amounts owed to carriers as a separate liability in the general ledger (GL) provides better control over invoices from suppliers. Identifying variances in expected freight charges and actual invoice amounts reduces the risk of duplicate or over payment of logistics charges. Tracking these charges improves visibility of total outbound freight costs, helping to reduce these costs by reviewing order quantities or seeking alternative carriers.
When items are purchased or shipped, you can accrue logistics charges as part of the process. GL accruals for inbound logistics charges are triggered by purchase receipts. GL accruals for outbound logistics charges are triggered by shipments. For each receipt or shipment, a pending invoice is created for each logistics charge accrual. Inbound logistics charges are built into the GL cost for items.