FOB Origin Means Your Inventory Clock Starts Early

Goods purchased FOB origin belong to you from the moment they leave the supplier's facility, which means inventory in transit needs to be recorded and valued even though you haven't received the goods or the freight bill yet. A close that only records inventory on physical receipt is understating assets in transit, sometimes by a meaningful amount if lead times run several weeks.

Say a $120,000 shipment leaves a supplier's dock on the 28th of the month but doesn't arrive at your warehouse until the 6th of the next. Under FOB origin terms, that inventory and its associated freight liability belong on your books as of the 28th, not the 6th, even though nothing has physically shown up yet.

Since the carrier invoice for that in-transit freight typically arrives after the goods do, the close depends on an estimate based on historical rates or a carrier contract, then a true-up once the actual invoice posts. Skipping the estimate and waiting for the real invoice pushes freight cost into the wrong period almost every time, understating cost of goods in the month the inventory actually moved.

A single purchase order for wholesale goods often arrives in more than one shipment, especially with backordered items, which means the close has to match partial receipts and partial invoices against one PO number instead of assuming one PO equals one invoice equals one receipt.

Say a 500 unit PO ships 350 units in the first week and the remaining 150 arrive three weeks later as a backorder, with two separate freight invoices and two separate supplier invoices tied to the same PO. Booking against the PO as though it were a single event either double counts the freight accrual or drops the second shipment's cost from the period it actually landed in, so track each PO's fulfillment status line by line rather than closing it the moment the first invoice arrives.

A customer short-paying an invoice for a damaged shipment, an early payment discount they weren't entitled to, or a promotional allowance dispute creates a deduction that has to be researched, approved or disputed, and cleared against the specific invoice it came from. This is rarely a large-dollar problem on any single invoice, but a distributor with deductions spread across dozens of accounts can lose real close-cycle time chasing down what each one was actually for.

Work each open deduction through these steps:

1. Research the deduction against its supporting documentation, such as the shipment record or the promotion agreement.
2. Accept it when it ties to a genuine damaged shipment or an agreed program.
3. Dispute it when it matches no agreed program or promotion, since accepting every deduction by default quietly erodes margin.
4. Clear it against the specific invoice it came from and give it a disposition before the books finalize.

Volume rebates earned from suppliers often settle quarterly or annually, well after the purchases that earned them, which means the close depends on estimating accrued rebate income based on purchase volume to date against the rebate agreement's tiers. An unreconciled rebate accrual is one of the more common places a distributor's margin picture turns out to be wrong at year end.

Say a supplier agreement promises a rebate once purchase volume crosses a set threshold for the year, and you're solidly past that threshold by the ninth month. If the rebate accrual on your books still reflects only what's been formally confirmed by the supplier rather than what your own purchase records already indicate you've earned, the accrual is understating a real asset, and the gap only gets corrected, often awkwardly, once the actual rebate check arrives.

A distributor with a modest customer count and a deduction volume that one reviewer can research and clear within the close window does well on FloQast, using the checklist model to enforce that every open deduction gets a disposition before the books finalize each month.

A distributor with deductions spreading across many customer accounts, where manually researching and clearing each one is the actual constraint on how fast the close can finish, benefits from BlackLine's stronger matching. The broader cross-industry average for accounts payable runs about 41.2 days¹, a useful reference point when judging whether your own vendor payment timing looks unusual next to your industry.

A distributor that only estimates in-transit freight during a slow month, then falls back to waiting for actual invoices once shipment volume climbs, ends up with the least reliable numbers exactly when volume, and the dollar impact of getting the estimate wrong, is highest. Keep the estimation habit consistent across busy and slow periods alike, rather than tightening it only when there's time to spare.