Cost of Goods Sold (Term Tuesday)

Cost of Goods Sold aka COGS or Cost of Revenue

1st of all please remember Cost of Goods Sold does not apply to just product based companies if you provide a Service you will have cost of services provided as well!

Definition

  1. Investopedia defines Costs of Goods Sold as “The direct costs attributable to the production of the goods sold by a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company’s gross margin. Also referred to as cost of sales.” http://www.investopedia.com/terms/c/cogs.asp
  2. QuickBooks Help defines Cost of Goods Sold as “The Cost of Goods Sold account is added to your chart of accounts the first time you add an inventory item. QuickBooks uses this account to track how much you paid for goods and materials that were held in inventory and then sold. While an item is held in inventory, its value is tracked in the Inventory Asset account, which is also added to your chart of accounts when you create your first inventory item. As soon as that item is sold using an invoice or sales receipt, its value is taken out of the Inventory Asset account and put into the Cost of Goods Sold account.”

For a service based company a few items that might be included but not limited to in your COGS account could include materials used to provide service, direct labor, subcontracted labor and commissions.

http://www.as-bookkeeping.com

Here is a link to brief informational video on Cost of Goods Sold by Investopdedia:

http://www.investopedia.com/video/play/what-are-cogs/

COGS

 

Direct Sellers- Do you know how much you’re earning on your hard work?

Direct Sales Businesses all operate on the same general principle of commissions & bonuses but do you track and understand your commissions and bonus’s or just wait till the end of the month to find out what will be deposited to your account or the check you will receive?  Direct Sales Company’s just like other companies make mistakes but if YOU aren’t keeping track of what you should be making how would you ever know if you were paid incorrectly or if they missed including you on a bonus? This is information you need to know PRIOR to your monthly, weekly, quarterly, or yearly checks!

Knowing what you’re going to make prior to your getting your check is important for many different reasons here are just a few:

  • Budgeting & Planning
  • Are you going to meet your monthly goal?
  • Are you going to miss out on a bonus because of just a few dollars?
  • Setting Goals for upcoming months to grow your business to the next level?
  • Are you working towards an incentive trip?  If so what do you need to sell each month in order to earn to that trip?
  • Can you afford to purchase that next round of sample products or promotional material?
  • Do you make more money on sales or sponsoring new members to your team?
  • Does your inventory need restocked and if so what do you need?

You Should KNOW the answer to all of these questions if you don’t then it’s time to get your bookkeeping in order for your home based business, we offer affordable rates to home based / direct sales business owners contact us today for your FREE consultation and get on the road to a better understanding of where your business is headed!

I have worked in direct sales myself so I have the experience to help you keep your business on track!

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