- The purchase order price is not your true cost: freight, brokerage, and tariffs can add 25% or more before goods are sellable.
- Item charges push those costs into inventory value, so your margins reflect reality.
- Allocate each charge the way it was incurred: freight by weight or volume, duty and tariffs by value.
- Landed cost flows into the item ledger, so every valuation and margin report inherits the true cost.
We were going through the books last week with the finance lead at a furniture importer that brings goods in by the container, and a familiar gap turned up.
The factory invoice said a dining table cost $180. By the time it reached the warehouse, it had also picked up ocean freight, a customs broker's fee, duty, and a tariff, so it really cost closer to $230. The system still said $180, which meant every margin number built on it was wrong.
It's a common, nearly invisible way importers lose money: they price off the factory cost and never see the slice that went to the freight forwarder and to U.S. Customs. Dynamics 365 Business Central, Microsoft's enterprise resource planning (ERP) system for small and mid-sized businesses, fixes it with a feature called item charges.
What the purchase order leaves out
The purchase order captures what you pay the supplier, not the costs of getting the goods sellable and into your warehouse:
- Ocean or air freight
- Customs brokerage fees
- Import duty and tariffs
- Insurance on the shipment
- Drayage and inland trucking from the port
These are real costs of acquiring the product, so accounting puts them in the value of the inventory, not in a general freight account where they disappear.
The price of the goods plus every cost it takes to land them in your warehouse. Capture it, and your inventory value and cost of goods sold tell the truth when you sell.
How item charges work
An item charge is a cost you attach to an item instead of buying it as inventory. You receive the container against the purchase order as usual. When the freight, brokerage, and duty invoices show up (almost always after the goods do), you enter them as item charges and assign them to that receipt. Business Central adds the cost to inventory value and raises each item's unit cost to its true landed cost.
The timing is the point: goods arrive in week one, the broker's invoice in week three, the freight settlement in week four. Because you can assign a charge to a receipt that's already posted, your inventory doesn't wait on the paperwork.
Splitting the cost fairly
A container holds more than one product, so a single freight invoice has to be spread across the lines. Business Central gives you four ways to allocate an item charge.
| Method | Spreads the charge by | Best for |
|---|---|---|
| Equally | evenly across every line | simple cases, rarely the most accurate |
| By Amount | the value of each line | duty, tariffs, and insurance |
| By Weight | the weight of each line | ocean freight |
| By Volume | the cubic volume of each line | bulky, lightweight goods like furniture |
Match the method to what drove the cost. The carrier charged by weight and volume, so allocate freight that way; duty and tariffs are a percentage of value, so allocate them by amount. Decide it once per type of charge.
Where it shows up
A posted item charge flows into the item ledger, the running record of cost and quantity movements for an item, attached to the receipt it belongs to. From then on, your inventory valuation, cost of goods sold, and margin reports all use the true landed cost, and you can see why one container cost more to bring in than the last.
Handling tariffs
A tariff is just another cost of landing the goods: an item charge, assigned to the receipt, allocated by value. Business Central doesn't have a tariff module and doesn't need one. Book tariffs as an item charge and you'll know your real cost per product the day a rate changes. Book them to a general expense account and you'll find out at year-end.
Receive the goods and assign the charges as separate steps. If you wait to do both at once, your inventory value is wrong in between, and a late freight invoice that lands after you've sold half the container turns into a month-end mystery.
Let's talk it through
If you're running Business Central, or weighing a move to it, and you want your inventory to reflect what your products really cost to import, we're glad to walk through your specific flow and show you how the pieces fit. No pressure, just a practical conversation about getting the numbers right.