Cost of sales (COGS) is a very important financial metric as it represents the direct costs related to manufacturing/provision of your goods/services sold to your customers. What is included in your cost of sales all depends on which industry you operate in.
To get a real understanding of your margins, in this flyer we share which expenses you should include in your industry cost of sales.
Specific to each of the following:
- Professional services (legal, finance, real estate, architects, etc.)
Why is cost of sales so important?
Whilst calculating the cost of sales is relatively simple, knowing this number will help to assess how effectively you are managing the manufacturing/service delivery process and help you ascertain the business’s overall gross profit margin.
The cost of sales formula is vital in understanding your business’s financial performance in greater depth.
The Cost of Sales formula:
Beginning Inventory + Purchases – Ending Inventory = $COS figure
If you need some help, Walsh Accountants is here for you
Understanding how to calculate the cost of sales is so important as it gives you the information you need to stay on top of your business’s financial health.
If you don’t understand the internal movement of your capital, cash flow becomes extremely difficult to manage.