A Quick Primer on Cost of Goods Sold
Cost of Goods Sold (COGS) software is a tool used to track the cost of raw materials and supplies, labor, and overhead associated with producing products. This type of software helps small manufacturing businesses accurately calculate their cost per unit and understand how much money they are spending on production expenses.
Having an accurate COGS calculation is especially important for small businesses because it allows for better informed decisions about pricing strategies, product development plans, and operations optimization. With up-to-date COGS data in hand, you can quickly adjust your production processes or pricing models to maximize profits without sacrificing quality. Additionally, having visibility into costs enables small manufacturers to more effectively manage their supply chain activities and identify areas where improvements may be needed.
Craftybase's Cost of Goods Sold software makes it easy for small manufacturing businesses to keep track of their production costs. Our comprehensive features allow you to easily capture and calculate the cost of materials, labor, shipping, taxes, overhead and more. With our software, you can accurately forecast your COGS in real-time and quickly make adjustments to optimize operations and maximize profits. Try Craftybase for free today to see how easy it is to gain control over your production costs and start making your profits soar.
COGS is short for "Cost of Goods Sold" which, in essence, is the claimable direct expense (cost) of creating all products (goods) you have sold within the financial year.
To calculate your COGS figures for an IRS filing, need to know 6 different calculations and then enter them on separate lines to get your final tally:
- Start of Year Material Inventory Value
- Purchases (Less Personal Use)
- Cost of External Labor
- Materials & Supplies (these are not your materials in most small business cases as they are factored into 1 and 6)
- Other Costs (Overheads)
- End of Year Material Inventory Value