The Dynamics GP Landed Cost module could be used for recording tariffs on purchased material, but there are several downsides to this approach.
The Landed Cost module adds some cumbersome overhead to PO Entry, Receiving and Invoicing, but the primary issue is whether or not it can do what it is supposed to do–value inventory at the total cost you paid you receive it.
- If your inventory is Standard Cost the tariff goes to PPV
- If you have already used the inventory by the time you get invoiced the tariff goes to PPV
- In the ‘ideal’ situation the inventory is revalued to include tariff. But if you might sometimes have already used the inventory you have a situation where sometimes it carries the cost of tariff and sometimes it does not
There are a number of downstream issues caused by wildly fluctuating inventory value (shown in the image above) which all center around your ability to operate business as you normally do without losing visibility into your profitability.
An alternate approach is to keep tariff costs out of your inventory and still ensure you are recovering the expense related to tariffs.
In POP you can either use a non-inventory item (i.e. Item Type of Services/Flat Fee/Misc Charge) or the PO Invoice Miscellaneous field. An Item can have the IV Account set to an Accrued Tariff Expense account, as can the Miscellaneous field (Posting Account Setup >> Purchasing). This will ensure the tariff expenses are always tracked at the GL and do not affect inventory value.
The WilloWare Tariff Module takes care of calculating tariff and adding it into Sales Transactions where it can add tariff on a per-sales-line basis or a total amount in the Miscellaneous field. The non-inventory item’s Sales GL Account can be an Applied Tariff Revenue account, as can the Miscellaneous field on the Sales Transaction (Posting Account Setup >> Sales).
This process tracks tariff revenue and expense at the GL to give you good visibility. Since the Tariff Module is adding tariff in real time you can react as quickly as tariffs change by either increasing or decreasing (or removing) the tariff as needed.
Learn more about the Tariff Module.