Do you want to make a huge difference in how you track your company’s financial health? Of course you do!!
That’s why it’s vital to track your COGS and Expenses.
Ok sure, but what are COGS & Expenses exactly?
Cost of Goods Sold (COGS) primarily refers to the direct costs associated with the production of goods or services that your business sells. Expenses on the other hand, encompass the indirect costs required to operate a business, beyond the cost of producing goods or services.
So for instance, if you are a hairdresser, you purchase products to use in your clients’ hair. These products are a direct cost to your business (COGS). If you purchases cleaning products to clean the salon, these are indirect costs and categorised as Expenses.
It is important to have a clear distinction between COGS and other categories of expenses to accurately determine the gross profit of your business. Why? Because gross profit is the money you have left after accounting for your COGS and to make informed decisions in your business, these costs need to be coded correctly.
When you know the costs involved in producing your product or service, you can avoid underpricing and ensure your pricing strategy aligns with your profitability goals!
By coding COGS and Expenses accurately, you are better equipped to spot trends and indentify cost-saving opportunities. Working closely with your bookkeeper will help you achieve coding accuracy so call or email for more information.
Call 0480 421 936 or Email info@steadfastbookkeeping.com.au