This article is relevant if you would like NetSuite to mark up shipping based on the percentage of the shipping costs.
Background
NetSuite’s built-in shipping methods give you a number of ways to offer shipping as a revenue stream via the definition of shipping items. Shipping items are part of NetSuite’s scheme for producing shipping method options. The primary ways shipping is offered is as follows:
- Rate Lookups: built-in tools to look up FedEx/UPS rates
- Flat Rate: a simple charge for a specific amount
- By Weight: A factor of the order weight
- By Item: a mechanism to have each item contribute to an element of the shipping price
- Shipping Table: an order or weight total lookup
Click the image to see the related information.
However, we are most interested in this one as it is close to what we are concerned with: how to mark up shipping using a simple percentage.
- Percent of Total: a percentage of the order total. This is not what we want.
The issue with all these approaches is that none allow you to accommodate a simple way to markup up the shipping price based on previously determined shipping costs.
For example, consider a policy where you look up the anticipated shipping costs with the built-in FedEx/UPS tools yet you want to mark it up by 20%. Maybe you want to pass through actual shipping costs but mark it up to cover the service? There is no offering.
Considerations for NetSuite Shipping Costs in Order Processing
In my 2019 article, Understand NetSuite Shipping Revenue, Costs and Margin Review, I discuss the different ways that shipping is handled in revenue and cost calculations. In that article, I discuss how a Sales Order shipping cost is a planned price that can be overridden by actual costs captured on each item fulfillment.
In all cases, no matter how it is sourced, shipping costs arrive on the invoice where it becomes earned as revenue. It’s at the point of invoicing that we have an opportunity to mark up the value by the desired percentage.
Shipping Percentage Markup Logic
To accommodate this situation for our clients, my firm built a table-driven way to make this easy for business users to define the percentages themselves. Through a markup table, we accommodated the following:
- Target Shipping Item: only act on shipping items that are on the transaction.
- Customer Reference: if a customer is referenced, then markup using this rate. If no customer is referenced, then treat as a global rule to be applied to any order.
- Markup Factor: take the costs sourced by NetSuite (in any manner once we land on the invoice), and then multiply it by the factor.
- Rounding Precision: for customer presentation purposes, take the resulting marked-up price and round it by a number of decimals.
Click the image to see the markup table.
Handle Customer Service Accommodation Situations
There are times where customer service would like to offer some type of accommodation to a customer. For example, if late in sending the order, the agent may offer a discount on shipping to reinforce customer loyalty.
To “accommodate” this situation, customer service can insert a new line on the sales order that effectively reduces the cost of the order. This line can then be routed to the invoice where it can have specific general ledger accounting and visibility.
Under this method, we do not touch or modify the normal shipping costs and related mark-up as this will lose information. We want our marked up shipping to flow to the financial statement as revenue earned. With the accommodation line approach, we can then see how much shipping revenue we are giving up in this practice.
To implement this practice, we can shape the order experience by asking the customer service representative to modify the shipping method to reference one that allows for accommodations. With this approach, we then use additional logic to ensure that our enhanced invoice logic indeed sees the accommodation line item. This ensures that our customer service team is using practices as prescribed.
Click the image to see the accommodation item.
Get the NetSuite Markup Shipping by Percentage Logic
Like all our previously-built algorithms created by my firm, we made this shipping markup logic free-of-license charge to our clients. In an implementation, the markup logic requires planning to provide considerations for sourcing shipping costs and assisting in shaping customer service accommodation situations. Many times, as we help our clients, they appreciate that we help them move to scalable exception-based transaction processing afforded by other license-free algorithms available.
If you found this article relevant, feel free to sign up for notifications to new articles as I post them. If you seek to mark up your NetSuite shipping based on a percentage of costs, let’s have a conversation.
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Marty Zigman
Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.
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Looking at your option for marking up shipping costs in NetSuite. Can we schedule a few minutes to discuss this solution?
Hello Jeff,
Given this is a specific challenge you face, instead of publicly talking about it, please reach out to us here to discuss:
https://www.prolecto.com/contact-us/
Hi Marty,
I want to associate a shipping cost with an item fulfillment so that the cost is reflected in the item COGS but don’t want to charge the customer for the shipping cost. What is the easiest way to do this?
Consider this article:
https://blog.prolecto.com/2022/03/26/update-netsuites-shipping-costs-and-accrue-for-freight-expense/
The key is use SuiteGL to drive the shipping costs into the order but then have the offseting credit be a clearing account for the actual costs that come through.