Cost of good sold (COGS)

Cost of good sold (COGS)

Overview

The cost of goods sold, often referred to as COGS, is the cost of the products that you have sold.

You can use the following simple calculation to get the Gross Profit of your transaction or sales:

Gross Profit = Sales - Cost of Goods Sold (COGS)

The more specific your COGS is, the more accurate your gross profit will be, resulting in better business decisions.

Stock in Cin7 Omni is valued as follows:

  • The price at which a product has been purchased or adjusted,

  • Plus any landed costs,

  • Less tax.

 

The price at which you purchase or adjust stock is applied to specific inventory items, price fluctuations and changes in exchange rates are accurately reflected in the cost of each item. Cin7 Omni does not calculate COGS using average costs.

If you buy in a foreign currency, the cost will be converted back to your base currency.

If you paid for freight or customs duty, these costs can be added to the total cost of your products.

COGS and sales orders

When a sale is first created, Cin7 Omni uses the most recent purchase price as a temporary cost to enable a summary of the gross profit of your sale - visible to the top right of the products grid.

When your order is dispatched, the true costs of the specific inventory items dispatched are used. If you use the FIFO stock control method the oldest product will be dispatched first.

At this stage, an invoice date should be entered, and the transaction imported to your accounting software.
COGS will only generate for a sale when:

  • The line item has been dispatched

  • A Fully Dispatched date has been entered

  • An invoice date has been entered

  • The Accounting Invoice Status is either Imported or Do Not Import in the Admin page.

 

Cin7 Omni automatically calculates COGS for all orders that fit these criteria once per day.

COGS and your accounting integration

If you are using the Periodic Method to account for your inventory, there is no need for COGS to pass to your Accounting Software. The purpose of COGS for you will simply be to analyze gross profit within Cin7 Omni.

If you are using the Perpetual Method to account for inventory, COGS are passed to a nominated expense account in your accounting software at the single click of a button.

You can import your COGS into both Xero and QuickBooks Online.

FAQs

No COGS have been generated for my order. Is this normal?

Check that the order fulfills the criteria mentioned above, that 24 hours have passed since you imported your accounting software, and then check that the items in your order did actually have costs associated with them.

How can I change the cost so that my Cost of Goods is correct?

Open the Purchase Order, Adjustment, or Branch Transfer that has received that product and change the cost there. However, if you have already sold the product, you can only correct the cost within one month following the sale date.

You can also change the cost of goods directly in Xero or QuickBooks Online.  

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