How Purchasing Affects Cost Layers in Luminous

Cost layers play a critical role in tracking inventory costs in Luminous. This guide explains how purchasing and receiving inventory impact cost layers and landed cost recognition.

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Key Takeaway

• Purchasing does not create cost layers.
• Cost layers are created only when inventory is received into the system.

Step 1. Understand Cost Layer Creation

• Cost layers are not generated when you create a purchase order (PO) or shipment.
• Adding additional costs (e.g., shipping or tariffs) to a PO or shipment does not immediately impact cost layers.

Step 2. Recognize Landed Costs

• Landed cost is only recognized upon completing a receiving report.
• This means that inventory must be fully received and recorded in Luminous before a cost layer is formed.

Step 3. Complete the Receiving Process to Create a Cost Layer

1. Navigate to the Receiving section in Luminous.
2. Create and finalize a Receiving Report for the incoming inventory.
   • At this point, the system recognizes the landed cost and creates a new cost layer.

Important Notes

• Purchasing and Shipments: While purchase orders and shipments allow you to allocate costs and manage incoming inventory, they do not affect cost layers or landed costs until inventory is received.
• Accuracy in Receiving: Ensure all additional costs (e.g., shipping fees, tariffs) are accounted for before finalizing the receiving report to properly reflect landed cost.

By following these steps, you can ensure that your cost layers and landed costs in Luminous are accurate and reflect the true value of your inventory.

Common Questions

I added freight to my purchase order. Why hasn't my product cost changed? Costs added to a purchase order or shipment are held until the inventory is received. Once you complete the receiving report, Luminous recognizes the landed cost, including those extra costs, and creates the new cost layer.

Does creating a shipment change my inventory value? No. A shipment tracks goods on their way to you, but cost layers and landed cost are only recognized when the inventory is received into the system.

A cost layer looks wrong or is missing. What should I check first? Check whether the receiving report has been completed, and whether all extra costs were added before it was finalized.

Why receiving is the trigger

Tying cost layers to receiving keeps your inventory value based on stock you actually have, not stock that's ordered or still in transit. Purchase order quantities and costs can change before goods arrive, through short shipments, damaged units or updated freight bills. Waiting until receiving means the cost recorded for each layer reflects what really landed in your warehouse, which keeps your cost of goods sold (COGS) and margins accurate.

A quick example

Say you create a purchase order for 1,000 units at $5 each, then add $500 of freight to it while the goods are on the water. Nothing changes in your cost layers yet: your existing stock keeps its current cost, and the incoming units aren't valued in inventory. When the shipment arrives and you complete the receiving report, Luminous recognizes the landed cost, the $5,000 for the product plus the $500 in freight, and creates a new cost layer for those units. If the freight is spread evenly, that works out to $5.50 per unit rather than $5.

At a glance: what creates a cost layer

• Purchase order created: no cost layer yet. You can still add or edit costs.
• Shipment created or in transit: no cost layer yet. The goods are tracked on their way to you.
• Receiving report completed: landed cost is recognized and a new cost layer is created.

In short, a purchase order is a plan and a shipment is goods in motion. Only receiving turns them into inventory with a recorded cost.

Best practices

• Add every known cost, such as freight, duties and tariffs, before you finalize the receiving report.
• Complete receiving reports promptly when goods arrive, so your inventory value stays current.
• Review new cost layers after receiving to confirm the landed cost looks right.

Related videos: How to Add Costs Upon Receiving in Luminous, How Receiving and Inventory Adjustments Affect Cost Layers and How Cost Layers Work When Completing an Assembly Order.