When talking about entering actual freight amounts, it is helpful to break this down into two types for billing: 1) freight bills that come from the vendor; 2) third party freight bills.
Freight Bills That Come from Vendors
Most firms will issue a purchase order to a vendor for products. These vendors will then invoice the design firm for the products plus the cost of the freight. For example, a design firm might order a floor lamp for $1,000. At the time the order is placed the design firm doesn't know how much the freight will be so they do not include any freight charge on the PO. When the lamp ships, or is about to ship, the vendor will invoice the firm for $1,000 for the lamp and $80 for the freight. At this point the PO amount is still $1,000 and the vendor bill is $1,080. A standard accounting requirement is that a purchase order must equal the vendor bill amount. For this reason, the vast majority of DesignSmart users will enter actual freight amounts into DesignSmart so the PO in DesignSmart matches the vendor bill amount.
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To learn more about entering Vendor Freight, please click here.
Freight Bills That Come from 3rd Party Shipping Companies
Now let's consider the case where you send a purchase order for a floor lamp for $1,000, but the vendor doesn't ship the lamp. Rather, the vendor has another shipping company ship the lamp and bills your firm directly for the shipping charge. In this case the original purchase order amount of $1,000 does not change because the bill from the vendor is still for $1,000. So the question is what to do with the vendor bill from the shipping company? The answer will depend on what information is important for your firm to have in DesignSmart.
Please keep in mind that neither option below is better than the other. It all depends on what works best for your firm.
Option 1 - Don't enter the 3rd party freight bills into DesignSmart
Many firms do not enter all project related costs into DesignSmart. For example there might be travel expenses, or presentation expenses, or other expenses that simply are not entered into DesignSmart so these firms will determine it not necessary to enter these third party bills into DesignSmart. The reasoning behind this is that DesignSmart is a project management tool for managing a project, but their accounting system, usually QuickBooks, is the tool they use to track the profit and loss for a project.
Pros |
Cons |
There is less data to enter into DesignSmart. |
Not all staff will see the actual freight amounts. |
The profit and loss reports in your accounting software will be accurate. |
The profit and loss reports in DesignSmart will not include these shipping costs. |
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Staff will not be able to see in DesignSmart if these freight charges have been invoiced. |
Option 2 - Enter the 3rd party freight bills into DesignSmart
If your firm would like to see most, if not all, costs in DesignSmart, then you can enter these costs as new line items in DesignSmart.
Pros |
Cons |
Staff can see all freight costs in DesignSmart. |
There is more information to enter into DesignSmart. |
Staff can confirm that these freight costs have been invoiced. |
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Since staff will see the actual freight costs, over time they can better estimate these costs on future projects. |
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The Profit/Loss reports in DesignSmart are more comprehensive because they include these costs. |
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These freight charges can be pushed to QuickBooks as invoices, eliminating the need for double entry. |
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To learn more about 3rd Party Freight, please click here.