Business Performance
Import costs and margins you cannot see
“We price imports off the invoice, and margins keep surprising us.”What owners tell us
The situation
Signs you are facing this
- Selling prices are set from invoice value rather than full landed cost
- Margins differ widely between shipments of the same product
- Duty, freight, clearing and LC charges are booked in different places
- Exchange-rate differences are not traced back to a product or shipment
The situation
Import costs and margins you cannot see
Driver 1
Landed cost built late, or not at all
Costs arrive after the goods are priced and sold.
Driver 2
Costs scattered across accounts
Bank and clearing charges sit outside cost of goods, so margin looks better than it is.
Driver 3
Averages hide recent price moves
Blended stock values mask the cost of the latest shipment.
- 1
Diagnose
Build landed cost per shipment
Purchase price, duty, freight, insurance, bank and LC charges, clearing and the rate on the day of payment.
- 2
Design
Test margin by product line
Price and mix decisions based on true contribution, not invoice margin.
- 3
Embed
Connect cost to cash
Link LC terms, stock days and customer credit so growth does not drain the business.
- A landed cost model by shipment and product
- Margin by product line
- Pricing guide linked to landed cost
- Working capital view across LC, stock and credit
Start this week
- Build a landed cost sheet for each shipment
- Book import costs to the product, not to general expenses
- Review selling prices when duty or exchange rates move
- Track stock days and LC exposure together
Common questions
What is landed cost?
The full cost of getting goods to your warehouse: purchase price plus duty, freight, insurance, bank and LC charges, clearing and handling, adjusted for the exchange rate at payment.
Why do LC charges and exchange rates matter to margin?
They add to cost but are often booked outside cost of goods, so reported margin overstates the real one. Over a year the difference can be material.
Related situations
- “We do not know which products or customers make money.”Not sure which products or customers make money
- “Revenue is up, but running the business feels harder than ever.”Revenue is up, but the business feels harder to run
- “We are about to scale, and I am not sure the model holds.”About to scale, unsure the business model holds