Landed Cost: What Cost of Goods Sold Actually Means
A common mistake in ecommerce bookkeeping is using the supplier's unit price as the full cost of goods sold. It isn't. Landed cost includes the supplier price plus freight to Australia, customs duty where applicable, and any inspection, quarantine or handling fees before the stock is ready to sell. Using unit price alone understates true product cost and overstates gross margin, a business can look genuinely profitable on the P&L while actually underpricing every product it sells.
Inventory Is a Balance Sheet Asset, Not an Expense on Purchase
Unsold stock is an asset until it's sold, not an expense the moment it's purchased. Many small ecommerce businesses expense inventory purchases as they happen, which distorts profit heavily in the purchase month, showing an artificial loss, and overstates profit in later months when that stock actually sells without a matching cost. A proper inventory system integrated with Xero (via apps like Cin7, Unleashed or DEAR) values stock on hand correctly and only moves cost to COGS as items are actually sold.
| Cost component | Included in landed cost? | Xero treatment |
|---|---|---|
| Supplier unit price | Yes | Inventory asset |
| Freight to Australia | Yes | Allocated into landed cost, not a separate expense |
| Customs duty | Yes, where applicable | Allocated into landed cost |
| Warehouse/3PL storage fees | Usually treated as period expense | Operating expense, not COGS |
| Platform referral/selling fees | No, separate cost | Selling expense, netted against channel revenue |
Watch: Landed Cost & Inventory Bookkeeping for Melbourne Ecommerce Businesses
Read the video transcript
If you're running an ecommerce business in Melbourne, the single biggest bookkeeping mistake we see is using the supplier's unit price as your cost of goods sold. It's not the full picture, landed cost is unit price plus freight, duty, and handling fees, and skipping that step means your margin looks better on paper than it actually is.
The second big one is treating inventory purchases as an expense the moment you buy them. Unsold stock is an asset, it should sit on your balance sheet until it actually sells, otherwise your monthly profit swings around based on when you happened to restock, not on what you actually sold.
And if you're selling across Shopify, Amazon and other marketplaces, each one settles differently, different fee structures, different payout timing, and lumping them all into one deposit in your bank feed hides which channel is actually your most profitable.
Quick action items: use landed cost, not supplier price, for COGS, connect a proper inventory system to Xero rather than expensing stock on purchase, reconcile each sales channel's settlement separately, and code stock write-offs to their own account so shrinkage is visible.
If you're a Melbourne ecommerce business and want your inventory and margin properly tracked, book a free 20-minute call at calendly.com/truetally, or call 0468 159 950. No silly questions, we've heard them all.
Multi-Channel Settlement Reconciliation
Shopify Payments deposits net of processing fees on a rolling basis, Amazon pays on a fortnightly cycle net of referral fees, FBA fulfilment costs and any reserves withheld, and other marketplaces each have their own fee structure and payout timing again. Booking these as a single lump deposit in the Xero bank feed, without reconciling gross sales against fees per channel, makes it impossible to see which sales channel is actually the most profitable once real selling costs are accounted for.
Stock Write-Offs and Shrinkage
Damaged, expired or lost stock should be written off through a specific adjustment in the inventory system and coded to its own expense account in Xero, rather than left sitting in inventory value or quietly absorbed into COGS without visibility. Tracking write-offs as a distinct line reveals whether shrinkage is a small, expected cost of doing business or a growing problem in receiving, storage or fulfilment worth investigating.
Multi-channel margin is invisible until each platform is reconciled separately
We connect Xero to your inventory and sales channel data so landed cost and true channel margin are visible every month, not just at tax time.
Book a Free 20-Minute CallKPIs Every Ecommerce Business Should Track Monthly
- ✓ Gross margin by product and by sales channel
- ✓ Inventory turnover rate
- ✓ Average landed cost trend
- ✓ Customer acquisition cost vs average order value
- ✓ Stock write-off / shrinkage rate
Compliance Calendar for Melbourne Ecommerce Businesses
Standard BAS applies quarterly, due 28 days after quarter end, with GST at 10% on Australian sales for GST-registered businesses. Businesses importing stock should track customs duty and any deferred GST scheme arrangements carefully, and superannuation guarantee at 12% applies to any employed staff, paid quarterly.
True Tally Bookkeeping, Melbourne
We work with ecommerce businesses across Melbourne and Victoria on landed cost, inventory valuation and multi-channel reconciliation.
Book a Free 20-Minute Call