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Outside Freight

"Outside freight" is freight billed by a separate carrier, not by the vendor whose product is on the purchase order. Typical example: a nursery vendor ships product on a truck owned by a freight company, and the freight company sends its own invoice for the haul.

This page explains how VMX records that cost on a PO, how it lands in your accounting platform when the PO is closed, and how the freight company's invoice clears the balance later.

The accounting goal

Outside freight is part of landed cost, so it should be capitalized into inventory along with the product cost. But it's owed to a different vendor than the product, so the bill the PO posts to your accounting platform can't include the freight amount in what it pays the product vendor.

VMX solves this with a standard pattern: capitalize the freight into inventory on the receiving bill, and offset it against a liability account that holds the obligation until the freight company invoices you. Two events, two bills, both flow through one account.

How it works in VMX

On the PO

Outside freight is entered as a PO Cost on the order page, under the Outside Freight cost type in the Other Costs window. There can be more than one outside freight cost on a single PO if multiple carriers are involved. (Outside Freight is one of the standard cost types in the PO Cost Types registry, which controls all the types offered in that window.)

The amount entered there is the total outside freight for the PO. VMX will allocate it across the items being received automatically, weighted by each item's share of the received cost.

When the PO is closed (bill written to your accounting platform)

The bill posted to your accounting platform has two kinds of lines:

  1. Inventory lines, inflated. One line per store (for many companies broken down further by department), coded to that store's Inventory account. The amount on each line is the received product cost for that portion of the order, plus its proportional share of the outside freight.
  2. A single negative line for the freight. Coded to the outside freight liability account, with amount equal to the negative of the total outside freight on the PO.

The two cancel out at the bill level, so the net amount paid to the product vendor is the product cost only. Inventory on the balance sheet rises by the full landed cost, including the freight.

When the freight company's invoice arrives

Enter that invoice in your accounting platform as a regular bill, payable to the freight company, with one line coded to the same outside freight liability account.

That credits the liability the receiving bill debited, so the balance in the account returns to zero once both sides are in. The freight company gets paid through its own bill. The product vendor gets paid through the PO's bill.

What needs to exist in your accounting platform

One account, set up as an Other Current Liability. Naming convention varies by client; "3rd Party Freight Payable", "Outside Freight Payable", and similar all work. The defining trait is the account type: it's a liability, not an expense and not an inventory account.

A few clients use an expense (COGS) account instead of a liability account for this. That works mechanically but the accounting meaning is different: the freight is expensed at receipt rather than capitalized into inventory. Pick the treatment that matches your accountant's preference and keep it consistent across all your POs.

Mapping the account

Once the account exists, send VMX the account number (or have your accountant share it). VMX will map outside freight to that account on your behalf, either as a single account for all stores or per-store if different locations book to different accounts. After the mapping is in place, the next PO closed with outside freight on it will post correctly.

How to verify it's working

After closing a PO with outside freight in VMX:

  1. Open the bill that was created in your accounting platform.
  2. Confirm there's a negative line coded to the outside freight liability account, with amount equal to the freight entered on the PO.
  3. Confirm the inventory lines together with the negative freight line sum to the product-only amount you owe the vendor.
  4. Run a Balance Sheet and check that the outside freight liability account has the unpaid balance you expect (one freight charge held per PO closed but not yet paid out to the freight company).

When the freight company's invoice is entered against the same account, the balance returns to zero for that PO's portion.

  • Order Page — where Outside Freight is entered as a PO Cost on the order
  • PO Cost Types — the registry of cost types available on POs and how each one behaves
  • Payable — closing the PO and converting it to an accounting-platform bill
  • QB Dates — sorting closed POs by the date the bill was posted to your accounting platform