INVENTORY AND WAREHOUSE MANAGEMENT
Landed cost is the true total cost of getting a product from your supplier into your UK warehouse and ready to sell. It is far more than the supplier invoice: it includes sea or air freight, insurance, import duty, customs clearance, port handling, currency movement and the finance cost of stock sitting in transit. Most importers still price off the supplier invoice alone, which is exactly why margins quietly disappear. On a typical £10,000 container, the real landed cost is often £12,000 to £13,000 once duty, freight, clearance and currency are added in. Price at a 20 percent markup on the invoice figure and you can be selling below your true cost without realising it. This guide breaks down what landed cost actually includes, works through a real £10,000 shipment, and shows how to push the true figure into Xero, Sage or your inventory system so every price you quote protects your margin.
The supplier invoice is only the starting point. The true landed cost of imported stock is built from every charge incurred before the goods are sellable on your shelf:
VAT is paid at import too, but for VAT-registered businesses it is reclaimable, so it affects cash flow rather than margin. Every other line above is real cost that belongs in your selling price.
Almost every importer starts with a spreadsheet, and almost every spreadsheet understates the true cost. The usual failure points:
The result is a per-unit cost that feels precise but is quietly 15 to 25 percent too low.
Take a single container of goods invoiced by the supplier at £10,000. Here is what actually lands on the cost:
True landed cost: £12,501, or 25 percent above the supplier invoice. If you priced this stock at the invoice figure plus a 20 percent markup, you would sell at £12,000 and lose £501 on the container before a single overhead is paid. The spreadsheet said you made 20 percent. You actually made a loss.
This is where most setups break. Xero, Sage and QuickBooks record the supplier invoice and the freight invoice as two separate bills. Neither bill knows about the other, so the per-unit cost in your accounts is just the supplier price. Your gross margin reports are then wrong by the entire freight, duty and clearance stack.
Xero does not calculate landed cost natively. You either add a third-party inventory app or run a proper inventory or ERP layer that allocates the freight, duty and clearance across the units on the shipment and posts the corrected cost of goods back to the accounts. Until that link exists, your finance team is reconciling by hand and your prices are built on a number that was never true.
Goods on the water are cash you have already committed but cannot see on the shelf. A business that cannot value stock-in-transit tends to over-order, because the warehouse looks empty while three containers are inbound, or to under-price, because the true cost is not known until the goods arrive and the freight invoice catches up weeks later. Tracking stock-in-transit and pre-allocating its landed cost means you can price and reorder on the real number from the day the order is placed, not the day it clears customs.
A proper inventory or ERP system removes the spreadsheet entirely. It captures the supplier purchase order, the freight bill, the duty and the clearance charges against the same shipment, allocates those costs across the units by value or weight, and posts the true per-unit cost straight into your accounts. Currency is recorded at the real payment rate. Stock-in-transit is visible. Every product then carries its real landed cost, so pricing, margin reporting and reorder decisions all run on figures you can trust.
This is the core of what we build for UK importers and wholesalers: one system where purchasing, shipping costs, stock and accounts finally agree. If you are pricing off a spreadsheet today, that gap is almost certainly costing you margin on every shipment. See how we implement inventory and landed-cost systems, or book a call to map your import and stock workflow.
Landed cost is the total cost of a product once it has arrived at your warehouse and is ready to sell. It combines the supplier price with freight, insurance, import duty, customs clearance, handling, currency movement and the finance cost of stock in transit.
Add the supplier invoice to every charge incurred before the goods are sellable: freight, insurance, duty, clearance and agent fees, port handling, the currency difference and finance cost. Then allocate the total across the units on the shipment by value, weight or volume to get a true per-unit cost.
No. Xero records the supplier bill and the freight bill separately and does not combine them into a per-unit cost. You need a dedicated inventory app or an inventory or ERP system that allocates the extra costs and posts the corrected figure back to Xero.
Landed cost is the true cost of acquiring and importing the stock. Cost of goods sold is that landed cost recognised in your accounts when the item is sold. If your landed cost is understated, your cost of goods sold and your reported margin are both wrong.
Your selling price should be built on landed cost, not the supplier invoice. Price off the invoice alone and a 20 percent markup can still be a loss once duty, freight and currency are added. Pricing off true landed cost is the only reliable way to protect margin on imported stock.
If you import or distribute stock and price off the supplier invoice, you are almost certainly leaving margin on the table, and on some lines selling at a loss. Landed cost is not an accounting nicety: it is the number that decides whether each shipment makes money. Get it into one system that connects purchasing, shipping costs, stock and accounts, and every price you set is finally built on the truth.
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