When you’re dealing with long term shipments which take about more than 2-3 days, it’s always the question of when the risks and rewards have been delivered from the supplier to you as the buyer. The reason it’s important is the pure fact of when you should recognize the goods as in transit and on your balance sheet.

If you’re not dealing with long term shipments as often, the easiest thing to do is just right when you make the order and if applicable, also sign the agreement, just make sure that at that time you already know the terms of shipment and delivery. If you’re obliged to take care of the shipment itself, pay for it and say even insure the goods, its definite the risks have already transferred, so they are your goods.

However, in case the supplier is supposed to take care of the delivery and more or less, ship the goods to your warehouse or your determined location, it’s more probable that the risks have not yet been transferred and hence the goods are not yet yours. It may be that the clause “Goods belong to the supplier until they have been shipped to client’s warehouse” is also an indicator of the transfer; however, it may be that the actual legal agreement or other co-operational documents overrule it.

Pay good attention to the terms of shipment and delivery and if the risks and rewards have been delivered to you, make sure the inventory is recognized as yours right when the transfer happened.