Capture Freight Cost as part of COS

Kinetic ERP
1

Background / Scenario

We have a fairly complex commission structure. Commissions are paid only on what we consider “true profit”. That means expenses like freight are included in the commission calculation.

Example

Order details:
Part cost: $10
Part price: $20
Quantity: 10,000 units

Without Freight

Order is picked, packed, and shipped.

Revenue: $200,000
Cost: $100,000
Profit: $100,000

Customer terms are Net 90 and the customer pays the bill.
Commission is paid on profit :partying_face:

With Freight (pass-through)

Order is picked, packed, and shipped.

Revenue: $200,000
Cost: $100,000
Freight revenue (pass-through): $50,000
Freight cost: $50,000

Freight vendor terms are Net 30.

We receive the freight bill and pay it at Net 30. This adds cost to the transaction, so we charge that cost against commission.

Commission impact at Net 30:

  • $50,000 cost (negative on commission)

At Net 90, the customer pays the order.

Revenue: $200,000
Cost: $100,000
Freight revenue (pass-through): $50,000

Commission is ultimately paid on profit :partying_face:

The Problem

Everything washes out eventually, but because the freight vendor bills us at Net 30, the rep shows a negative commission of $50K for roughly two months while we wait for the customer payment to catch up.

That means for about two months the rep effectively has no take-home commission :sad_but_relieved_face:

What We Are Trying to Solve

We are trying to figure out if there is a way to capture freight costs as part of the part COGS so everything washes at the same time from a commission perspective.

Containers already do this to some extent, but using containers for domestic orders or freight feels wrong.

6 Likes
2

Are you charging that freight cost to the customer as a misc charge on the shipments?

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3

Yes the revenue side yes.

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4

Is your freight cost consistent? You could just put it in as material burden % and not worry about matching to the penny.

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5

It is not it depends on … which carrier, warehouse, lcoation, item.. LTL vs Parcel yada yada.

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6

Yeah that makes it harder. Are you capturing the real freight cost at the time of shipping? Or can you go off the anticipated shipping charge?

2 Likes
7

This, and square up smaller amounts later.

4 Likes
8

I’m new here but can you flag both sides passthrough and exclude from comm calcs?

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9

We could but sometimes we don’t pass it through (its up to the Sales Rep) sometimes they eat the cost and we do have to add that cost in those cases.

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10

Job Misc AP Invoice line goes to WIP/COS I believe but you’re prolly shipping from stock.

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11

Correct we mostly ship from stock.

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12

Color of the sky tomorrow, day of the week, what the prime minister of timbuktu ate for late night snack 2 days ago…

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13

BRUH #SpoilerAlert quit giving away out competitive advantage!

3 Likes
14

Have you discussed with Accounting? I typically set up a Freight IN and Freight OUT COS General Ledger (GL) account. You wouldn’t need to charge the cost against the Commission account then. Is that an option for your setup/business model?

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15

The problem is that it is not always in and out. Sometimes we eat the cost but still need it reflected in the commission (COST)

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16

Could you pay commissions based on the invoice, rather than the payment? Hurts cash flow but pays your sales reps.

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17

Does capturing freight cost in the COS solve your problem? Wouldn’t you still have the issue of not getting paid commissions until the customer pays (net 90)?

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18

Sounds like you need to buy the new mind-reading module. Makes the system do whatever you want automatically.

3 Likes
19

@josecgomez - are you specifically looking for an easier standard functionality approach?

If you cannot come up with a standard functionality and don’t want to use containers, either temporarily breaking the transaction SO reference links relied on for the commission queries, tweaking the dates to exclude the transactions from the filters, or entering custom PartTran ‘adjustment’ records to temporarily offset the amounts via BPMs or Epicor Functions should enable you to achieve what you need.

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20

Tha’ts fine though because the rep wouldn’t be hit with a cost until that happens. The issue is that right now we “hit” their commission with the cost of the freihgt at Net 30, while COS / REV doesn’t hit till the customer pays at net 90.

So for 60 days they carry a negative balance and if thes were to coincide with period ending which it often does then they get no money… (potentially)

1 Like