Cost Of Goods Sold: What is it, and how does it factor into my bottom line?

Whatever it is, What does it cost to deliver your goods and services? If your answer is basically a mumble and some shuffling of papers, it's time to take a hard look at your cost of goods sold (COGS). Cost of goods sold is the total amount your business pays in costs directly related to delivering your product or service. This includes things like raw materials, packaging and shipping.

Once you nail down your COGS, you may find that you are not making quite the profit you thought! It may be time to adjust prices, phase things out, find new sources for your materials, or streamline your processes. Even if you think you have a pretty good grasp on your costs, it's always a good idea to check back in from time to time to adjust for changes in the market. Things like increasing fuel costs (HELLO) and fluctuations in the costs of materials can creep up on you and eat into your profit.

Don’t know how to start? Schedule a meeting with your CPA or bookkeeper and talk about how to break down your cost of goods effectively. They can help you figure out what factors in and track those numbers so you can make informed decisions about your pricing! Do YOU track your COGS to make pricing decisions, or are you guessing? Sound off in the comments!

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