Bookkeeping Strategy: Cost of Goods Sold
Bookkeeping isn’t nearly as straightforward and task-focused as many business owners believe it to be. The truth is, that the necessary day-to-day task work is only a piece of the bookkeeping and accounting puzzle. Business owners can take their business to the next level by adding strategic initiatives and accounting support on top of the ongoing essential bookkeeping tasks. Keeping the data clean and up to date is important, but it isn’t enough for a growing business. Today we’re looking at how business owners can use their inventory as a tool to understand the financial health of their business. For product-based business owners, this is a must.
Let’s think about our fictitious friend Paul. Paul is the proud owner of a cookie business that from the outside, seems ‘successful.’ He sells out of product at every pop up he does, he has new regional stores wanting to carry his product, and after his story was picked up by a local news station, his online sales are higher than ever. But there’s a problem-Paul isn’t seeing his bank account growing as fast as his cookies are selling. In fact, there are some months that things are a little tight and don’t feel very ‘successful.’
This feeling is common for entrepreneurs who have product-based businesses. They know they should be seeing more in their bank account but they can’t understand the disconnect. They track all their sales and their expenses and stay on top of their bookkeeping but at the end of the day, they’re grasping at straws. Why? Well, the easy answer is that it’s because they aren’t bookkeepers or accountants-they’re entrepreneurs. Every business is unique and will have its own set of challenges, but in Paul’s case, as is with many food entrepreneurs, one of the problems he has is his COGS (cost of goods sold). Paul isn’t making a desirable profit on the cookies because Paul doesn’t know how much the cookies are actually costing him to make.
When Accountfully partners with food entrepreneurs like Paul, we help them understand every cost associated with their product. From the gold-foiled sticker on the front of the bottle to that ingredient that just got more expensive because it was hit with a tariff-Accountfully helps business owners detail every cost that goes into their product. And the truth is, these are the types of details that people like Paul may not think to consider when pricing his cookies. But that’s not Paul’s job. That’s the job of his bookkeeping and accounting team. A good bookkeeping and accounting team can give its clients insight into what they should charge based off the margin they want to make.
Through smart bookkeeping and accounting strategies, Accountfully helps food entrepreneurs and producers of packaged goods increase their bottom line. Committed to understanding their product and their vision, we help them create and track both short and long term goals. If you own an inventory-based business and you wonder if your COGS are correct, let us know-we can help you dive into the details of your business and empower you to be more informed and more prepared for growth and success.