The Cost Increase Hiding at the Bottom of Your Supplier Invoice
Written by: Melissa Cunliffe (CA)
The Cost Increase Hiding at the Bottom of Your Supplier Invoice
A supplier can tell you the product price has not changed and your margin can still be worse than it was last month. The reason may be sitting in a small line near the bottom of the invoice: freight, fuel levy, delivery or logistics surcharge.
Primary Connect, Woolworths Group's logistics business, published Australian road fuel levies effective 5 October 2026 of 19.88% for local freight and 50.30% for linehaul, up from 17.47% and 44.20% respectively in the previous period. ABC reported the metro levy was almost three times its pre-war level. Those are specific logistics charges, not a universal market rate, but they show how quickly fuel exposure can move through supply chains.
Purchase price is not landed cost
For margin analysis, the relevant number is what it costs to get the product into a position where it can be sold or used. That can include freight, fuel levies, insurance, duties, handling, storage and other directly attributable costs.
If management compares selling price only with the supplier's base unit price, it may overstate the margin that is actually being earned.
Small percentage changes can destroy low margins
Consider a wholesaler selling a product for $110 that historically landed for $90. The $20 gross profit is an 18.2% gross margin. If freight and levies push landed cost to $95 while the selling price stays at $110, gross profit falls to $15 - a 25% reduction in gross profit dollars even though the selling price did not change.
Regional businesses can feel this first
Longer transport distances and linehaul exposure can make regional businesses more sensitive to logistics surcharges. They can also have less supplier choice and may face customer resistance if they try to reprice quickly.
What to review this week
Take a sample of current supplier invoices and compare every non-product charge with three and six months ago. Then update the costing system so freight and levies are assigned to products, jobs or customers rather than disappearing into a general overhead account.
Pricing needs evidence
The objective is not to pass every cost increase directly to customers without thought. It is to know where the margin is being lost and decide deliberately whether to reprice, renegotiate freight, change order quantities, change suppliers or accept a temporary margin reduction for strategic reasons.
Where the 4P's Future Prosperity Framework fits
People: Give owners and managers visibility before cost pressure becomes stress.
Preserve: Protect margin by understanding true landed cost.
Protect: Use better costing and supplier terms to manage volatility.
Prosper: Focus growth on products and customers that remain profitable after logistics costs.
FAQs / People Also Ask
What is landed cost?
It is the total cost of getting goods into a saleable or usable position, not just the supplier unit price.
Should freight be included in gross margin?
Management reporting should allocate material direct freight and levies in a way that reflects the real economics of products or jobs.
Are fuel levies the same for every business?
No. They vary by provider, contract, route and pricing mechanism.
A supplier's base price does not always show the full cost of doing business. Reviewing freight, fuel levies and other invoice charges can help you understand true landed costs and protect your margins.
Contact 4P's Future Accounting to discuss better costing and financial decision making for your business.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
