Logistics Accounting: Best Practices To Follow​

Logistics accounting refers to handling all the finances of the main aspects of logistics. This involves managing and tracking financial transactions and regulating all the information related to the finances inside a company that deals with logistics. Usually, this involves accounting related to the storage and movement of goods, materials and resources throughout the supply chain.

This is a very critical job that needs close monitoring and constant evaluations. If it is not handled with care, the companies can suffer a huge amount of loss in their businesses. This is why it is necessary for companies to follow good practices in order to achieve peak financial optimization with regard to logistical operations.

Before diving into the best practices that one needs to follow for logistics accounting, let us understand what the main aspects of logistics accounting are.

Main Aspects of Logistics Accounting:

• Inventory Management:

This aspect involves keeping track of the costs involved in the procurement of goods, raw materials, storage and distribution. By keeping track of these, it gets easier to manage the flow of goods in the inventory with high efficiency.

• Transportation Costs:

When the goods are transported from supplier to companies and then companies to customers, it incurs costs. Keeping track of these costs and managing them efficiently is the main goal of this aspect. This involves the costs of freight management, shipping charges, fuel expenses and other transportation-related costs.

• Warehousing Costs:

In the supply chain, the goods are stored and then distributed from a facility. This facility is known as a warehouse. So, the cost of storing and distributing the goods thereafter is called warehousing costs. This usually involves rent, utilities, labour charges, etc.

• Order Fulfilment:

The process of shipping parcels (goods) from suppliers to companies, packing them into warehouses, picking them from the facility, and then finally dropping the parcel at the intended customer is known as order fulfilment. The cost incurred during this process is the order fulfilment cost.

• Supplier and Vendor Management:

This aspect involves costs incurred during financial transactions amongst suppliers and vendors.

• Overall Cost Allocation:

The determination of costs for particular goods and products based on their potential profitability is considered to be one of the most important aspects of accounting. This also involves ways to limit the overall costs in transportation, and optimizing supply chain costs.

Now, let’s understand the best logistics company accounting practices that should be followed by companies for their logistical operations for each of the aspects discussed above.

Best Practices To Follow in Logistics Accounting:

For Inventory Management:

  • One should implement a robust inventory tracking system that accurately records and monitors incoming and outgoing goods.
  • Regular physical inventory counts need to be conducted to keep the recorded inventory levels balanced.
  • Use automation wherever possible to improve accuracy and minimize human errors.
  • Analyze inventory turnover rates to avoid overstocking and stockouts.
  • According to the industry norms, follow First-In-First-Out (FIFO) and Last-In-First-Out (LIFO) methods for cost allocation.

For Transportation Costs:

  • One needs to maintain detailed records of all the minute charges including freight costs, fuel expenses, and tolls.
  • Invoices from carriers need to be closely monitored to ensure accuracy and avoid overbilling.
  • Reduce costs and delivery times by optimizing transportation routes
  • Consider using transportation management software in order to efficiently plan and track shipments.
  • To secure competitive rates, negotiate favourable contracts with reliable carriers.

For Warehousing Costs:

  • Both variable and fixed costs need to be defined and documented.
  • Review warehouse performance.
  • Identify opportunities to save costs.
  • Implement proper security measures to prevent shrinkage or loss of goods.
  • Explore the possibility of a shared warehouse instead of a standalone one to reduce costs.

For Order Fulfilment:

  • Monitor order fulfilment trends such as order cycle and order accuracy.
  • Activate real-time updates by integrating order processing systems.
  • Adopt barcodes and RFID tags for your goods to increase accuracy and tracking.

For Supplier and Vendor Management:

  • Make sure you communicate with the stakeholders as effectively as possible.
  • Make the payment terms crystal clear in order to fulfil the payment requirements as early as possible.
  • Monitor the supplier performance and highlight any issues promptly.
  • Automate the billing system and use only electronic bills to streamline transactions.

For Cost Allocation:

  • Use activity-based costing (ABC) methods to allocate costs more accurately.
  • Define the cost allocation methods clearly in order to make sure it stays consistent throughout all accounting processes.
  • Review and update your cost allocation methods regularly according to changing business needs and manage your logistics costs efficiently.


Now you have a clear idea about how to follow best practices in order to carry out accounting in logistics as smoothly as possible. Keeping the above aspects in mind, you will never get stuck in confusing cycles of handling your finances when it comes to logistics.

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