Recording shipping - a simple guide from postnord
As a business owner, when you hire a shipping company to transport and deliver goods to your customer, you receive an invoice for the costs associated with the shipping. Your company thus incurs an expense, which must be paid but also properly accounted for. This applies regardless of whether you pass on all or part of the cost to the customer.
Recording shipping doesn't have to be complicated, but it's important that it's done correctly - just like any other type of expenditure (and income). How transport and delivery costs are recorded depends on what is included in the charges, which accounting method you use and whether you have hired a Swedish or foreign shipping company.
To make it easier for you as a business owner, we at PostNord have put together an introductory guide to what applies when accounting for both expenses and income related to shipping. We want to make it easy for you to do the right thing.
Why do you have to record shipping?
Bookkeeping is a legal requirement for all companies in Sweden, regardless of their legal form. Large limited companies as well as small partnerships and sole proprietorships are subject to the so-called accounting obligation, which in short means that all business transactions must be recorded in a systematic way. Partly to increase transparency in the company, but also to create order and clarity.
In order to have a good overview of your company's income and expenditure, it is important to have different bookkeeping accounts for different purposes. For example, by recording all shipping and delivery costs in one account, consumables in another and staff costs in a third, you can keep full track of all the different types of costs and what proportion they make up of the whole.
Separating the shipping charge from the value of the goods delivered is also important to get accurate figures in your accounts payable.
Account groups for shipping and delivery costs
Different accounting and business systems may be structured differently, but the structure of account groups is usually the same in all of them. When accounting for shipping, you usually use one or more of the following account groups:
- Account group 26: Accounting for VAT
- Account group 30-39: Revenue accounts when shipping charges are re-invoiced
- Account group 40-45: Purchases of goods (including shipping costs)
- Account group 46: Shipping costs to affect gross profit
- Account group 57: Cost accounts for shipping on sale
Recording shipping charges on sales
Shipping costs should always be recorded separately when you sell goods to a customer and use a transport company to ship and deliver the goods. If you use PostNord for the collection, transport and delivery of a consignment, you will receive a supplier invoice from us for that cost afterwards.
The invoice amount is recorded in full as an accounts payable (usually accounting account 2440) in credit. You separate the shipping cost and VAT and enter it in debit. Shipping costs are in most accounting software in account group 57. Input (Swedish) VAT has account number 2640 or 2641.
Recording shipping charges on purchases
Shipping incurred on the purchase of goods for your company should not be recorded separately. Instead, this charge is recorded in the same account as the purchase itself, as the cost of transport (including insurance for the shipping) is considered to be part of the acquisition value itself.
Purchases from Swedish suppliers are usually booked in account group 40 - for example in account 4010 or 4011. Swedish input VAT is added at 6, 12 or 25% depending on the type of goods purchased. The VAT rate for shipping will be the same as for the goods purchased.
When buying goods from a supplier abroad, the so-called reverse charge applies to both the goods and the cost of the shipping. Foreign purchases of goods are recorded in a different account from Swedish purchases - usually in account group 45 - and VAT is recorded in accounts 2615 (outgoing) and 2645 (incoming). The same amount is recorded for input and output VAT, with input debited and output credited.
If you import goods from abroad, as a buyer you will be liable to pay import VAT and customs duties. The amount you pay depends on the type of products delivered and the total value of the goods. If you are a PostNord business customer, you can easily do this via the Pay VAT service in PostNord Portal Business.
Vat for shipping within and outside the EU
If you have a company registered in Sweden and use a Swedish shipping company for the transport and delivery of the consignment to the customer, 25% VAT will be added. The VAT rate is the same for deliveries within Sweden and to other EU countries.
Shipping costs for consignments to be sent outside the EU - i.e. export - are not subject to VAT for you as a seller. Instead, it is the recipient who must pay VAT and any customs duties in accordance with the rules in force in the country concerned.
If you book shipping and delivery with PostNord to a country outside the EU, the invoice you receive from us will have 0% VAT. The same applies if you, as the seller, use a foreign shipping company (inside or outside the EU) - the VAT obligation falls on the buyer.
How to record the re-invoicing of shipping costs
Re-invoicing of shipping costs means that you, as a seller, invoice a customer for a shipping charge equivalent to the one you had to pay when you bought the goods from your supplier. The rate of VAT on the re-invoicing of shipping will be the same as that on the goods being transported. For example, if you sell goods with 25% VAT, the VAT rate for shipping is also 25%.
VAT is always recorded on account 2640/2641 for input and 2610/2611 for output, regardless of the VAT rate.
When you re-invoice a shipping cost, it is recorded as income (in debit) in account class 30.
Cash or invoice method
The cash method and the invoice method are two different ways of recording business transactions in a company. As a business owner, you must choose one of these methods when you register your company. It is not possible to mix the two approaches.
If you use the cash method, you record your customer and supplier invoices when the payment is complete. For example, if you have ordered shipping and delivery to a customer from PostNord and receive an invoice for the cost, you only include it in your accounts when you pay the invoice.
The total amount paid is then credited to the bank account, the input VAT is debited to account 2640/2641 and the shipping cost itself is debited to account class 57.
If you use the invoice method instead, you include unpaid invoices in your accounts - which create so-called trade receivables for outstanding invoices to customers, and trade payables for unpaid invoices from your suppliers.
An invoice for carriage charges from PostNord is booked according to the invoice method as a payable on credit in account class 24. The VAT and cost accounts will be the same as for the cash method. When the payment is made, the debt is settled by crediting the bank and debiting the accounts payable account.
Making it easy to do it right
Recording shipping charges and other costs related to the transport and delivery of goods can be cumbersome. Especially if your company buys and sells goods to and from other countries.
To make it as easy as possible to get it right, it makes sense to invest in a simple accounting system that is both suitable for your business and easy to use. If you need help with declaring VAT on shipping for purchases and/or sales, you can always visit the Swedish Tax Agency's website or contact their customer service.
Looking for more logistics-oriented information? Here you will find more reading on the subject of logistics.