Manual Freight Entry Ignores Freight Purchase Invoices

Does the order or dates of entry of the Customer Sales Invoice, Goods Purchase Invoice, and Freight Forwarder Purchase Invoice have an influence on the Inventory Profit Margin values under Reports?
I have noticed that the Manual Freight In method will ignore Freight Forwarder Invoices that were made after the Customer Sales Invoice.

Example: 1st June: Customer Sales Invoice-> 2nd June: Goods Purchase Invoice-> 3rd June: Freight Forwarder Purchase Invoice-> 4th June: Goods Receipt-> 5th June: Delivery Note

For an item costing 5$ and shipping costing 1$, the cost of sales in the report is shown as 5$, so is the Average Cost.

Note, the freight cost is correctly assigned via creating a separate purchase invoice under the freight forwarder address, with the same item under inventory at hand assigned the amount 1$ and no value in the quantity field.

Order of entry does not. Dates of entry can. To comment further, we would need to see the Edit screens of relevant transactions. It also matters what date the Inventory Profit Margin report is generated.

Turns out the date on the Freight invoice does affect Inventory Profit Margin calculation, and Average Cost as well. Here is a sample business I built to test this out.

  1. Created a Customer Invoice on the 25th.
  2. Created a Manufacturer Invoice on the 25th
  3. Created a Freight Forwarder Invoice on the 26th
  4. Created an Inventory Profit Margin that starts on the 1st and ends on the 30th
  5. The resulting report shows a 50% profit margin
  6. Changed the date on the Freight Forwarder Invoice from 26th to 25th

    7.The resulting report shows a 40% profit margin

Why would you expect anything different?

If the Freight-in cost is dated 26th how could it possibly affect the cost of a product sold on the 25th?

1 Like

@Joe91 is correct. Now that we have all the relevant information, it is possible to say that the date range of the Inventory Profit Margin report was not a factor. Inventory profit margin is based on average cost of the item(s) sold on the date of sale. In your test case, @Adam, the average cost did not include freight-in on the 25th. The freight-in costs you added on the 26th will affect future sales of the inventory item(s) involved. The costs are not forgotten.

Thanks for the reply, I’m glad my query was clear. The issue for me is that sometimes, my Freight Forwarder will deliver the Inventory Items to me and then Invoice me for the service at a much later date, sometimes well after the goods have been Invoiced to and Delivered to the Customer. Hence based on what you are saying is standard, and what I have observed, the Freight Invoice will not be part of the Cost of Inventory:

  1. Unless the Freight Invoice is created before the Customer Sales Invoice.
  2. A second Customer Sales Invoice with the same Inventory Item is created after.

This means, at least for my case where our operations are relatively out of sequence, the Inventory Profit Margin report may not be correct.

Why not assign, in an absolute manner, Cost of Inventory and any other costs assigned to that Inventory Item without relying on the dates? If a user assigns some cost to an inventory item, sold or not, I believe the intention is clear, they want it to be part of the average cost of the item.

As a side note, I also have this issue while working with different currencies, whereby, if I purchase a foreign currency, like GBP today, when the exchange rate is favourable to me, and enter that rate, then keep the currency in my GBP account, and spend it later, say 6 months, on an inventory purchase, and by then the exchange rate has worsened, Manager will just use the exchange rate that is closest in date to the Purchase Invoice created.

At the moment, I’ve resorted to creating a custom field for Purchase invoices with the actual invoice date, and I’ll enter a Manger friendly date for the Freight Invoices to cope with this requirement.

Cost can not be allocated irrespective of dates - that would completely falsify the average cost method used by Manager

All transactions use the exchange rate you enter in Settings or the implied exchange rate entered in receipts and payments. Changes in foreign currency exchange rate give rise to Foreign Exchange Gains/Losses which are handled automatically by Manager

And it will be as of the date of the transaction. What you suggest would be no different than suggesting that a purchase a year later at twice the cost of the earlier purchase should raise the cost of goods sold a year earlier. The behavior you observe is a well-known characteristic of average cost inventory accounting.

Incidentally, there are other features of the Inventory Profit Margin report you also might not like. For example, it ignores inventory items sold as part of inventory kits because there is no reliable way to allocate income from the kit back to component items.

As a final note, please do not divert topics with unrelated issues, such as your comments about exchange rates. That violates the rules of the forum, because it almost guarantees members who could help will not read about it.

I thought there would be another solution but this works for me so I’m good for now.

I don’t understand that you call this the solution. Normally you would create and use a Freigth(-In) Provision account, which gets balanced at the moment of entry of the actual freight(-In) invoice.

1 Like

@Adam, I agree with @Mark. Your approach involves entering false information in your accounting records to force your profit margin calculations agree with your mistaken view of how average cost inventory accounting works. If you are ever audited, this is going to cause problems for you, because you are causing your accounting system to overstate your expenses and understate your net income. (Your approach affects more than just the Inventory Profit Margin report. It affects your net profit calculation by inflating your cost of goods sold.)