When a business deals with international trade, it often encounters complex and sometimes suddenly changed duty policies (tariffs, taxes, and import fees). Bookkeeping Services in Cincinnati. These "questionable" or volatile policies can severely impact a budget.
A skilled bookkeeper or accounting professional doesn't set the duty policy, but they provide the financial infrastructure and data analysis necessary to budget for, navigate, and potentially challenge those costs.
1. Accurate Cost of Goods Sold (COGS) Calculation 🧮
The most critical assistance a bookkeeper provides is ensuring your product pricing and profitability are based on the true cost of importing.
Capitalization of Duties: The bookkeeper correctly follows procedures to add new or increased duties (tariffs, customs fees, etc.) to the cost of your inventory. This is known as the Landed Cost.
Preventing Expense Underestimation: If duties were incorrectly treated as a simple operating expense, the bookkeeper ensures they are correctly capitalized into the inventory asset. This prevents your Gross Profit from being artificially inflated and helps you set a realistic sales price from the start.
Tracking Policy Changes: They set up separate accounts or tracking categories to monitor the costs specifically tied to the questionable duty policies. This isolates the financial impact for management review.
2. Budget Forecasting and Variance Analysis 📈
A bookkeeper translates abstract policy changes into concrete budgetary adjustments.
Scenario Planning: By having detailed cost data, the bookkeeper can help management run "what-if" scenarios: "If the tariff remains at 25% for the next quarter, our COGS will increase by $X, and we need to raise our sales price by Y% to maintain our margin."
Budget vs. Actual Reports: They prepare reports that specifically compare the budgeted duty cost to the actual duty cost paid. This variance analysis immediately highlights whether the company is overpaying, under-forecasting, or if the policy impact is different than expected.
Cash Flow Projections: High and unpredictable duties are significant cash drains. The bookkeeper refines cash flow forecasts to include these large, lumpy payments, ensuring the business doesn't face liquidity issues.
3. Documentation for Compliance and Refunds 📑
The bookkeeper is responsible for gathering and organizing the detailed documentation often required for compliance, audits, or seeking duty relief.
Proof of Origin: They ensure all documentation (such as Bills of Lading and Commercial Invoices) is retained to potentially prove the country of origin of goods, which is vital for qualifying for trade agreements or avoiding specific tariffs.
Recordkeeping for Mitigation: If the business decides to seek a duty drawback (a refund of duties paid on imported goods that are later exported), the bookkeeper maintains the rigorous transaction and inventory records necessary to support the claim.
Audit Readiness: Should customs authorities audit the business, the bookkeeper ensures that every duty payment, classification, and tax recovery (like import VAT/GST) is supported by official source documents, such as the Bill of Entry or customs declaration forms.
