cogs acronym business

The terms “profit and loss statement” and “income statement” are used interchangeably. Cost of goods sold is an important number for business owners and managers to track. That is the absolute lowest price you can sell a product to break even. Any additional margin goes back to covering overhead and eventually profit. If you don’t know your COGS and break-even point, you don’t know if you’re making or losing money. Depending on your business, that may include products purchased for resale, raw materials, packaging, and direct labor related to producing or selling the good. Many companies use the phrase operating expenses to mean the same thing.

Unlike B2B, B2C refers to business conducted between a company and a consumer. We’ve compiled a glossary of commonly used inventory management terms you’ll need to know for inventory management. That way, you don’t have to interrupt your research with googling for definitions.

EDI = Electronic data interchange

For businesses with under $25 million in gross receipts ($26 million for 2020), there are some exceptions to the rules for inventory, accrual accounting and, by extension, COGS. Different accounting methods will yield different inventory values, and these can have a significant impact on COGS and profitability. As evidenced by the COGS formula, COGS and inventory go hand-in-hand.

You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.

PLM = Product lifecycle management

While SKUs may be tracked manually , they are most commonly attached to unique barcodes, RFID tags, or QR codes for easy tracking and processing within the system. Advanced planning and scheduling systems are used by manufacturers and logistics companies to track cogs acronym business costs and capacity. The use of an APS system may affect lead time for small-business owners, especially if you’re ordering particularly small or large quantities at a time. Cost of Goods Sold is the cost of a product to a distributor, manufacturer or retailer.

  • This free cost of goods sold calculator will help you do this calculation easily.
  • Investopedia requires writers to use primary sources to support their work.
  • It excludes indirect expenses, such as distribution costs and sales force costs.
  • Costs that keep a business running but that are not directly related to making or obtaining inventory — such as administrative and selling expenses — are not included in COGS.
  • Product lifecycle management is the management of products throughout their “lifecycle” from introduction through decline.

G&A is an operating expense that includes the daily costs of operating a business regardless of sales or other business activity. G&A expenses include rent, utilities, insurance, and office supplies. A stock-keeping unit is a code attached to items within your inventory. Typically 8 to 12 characters long, the SKU helps businesses track items as they move between phases in the supply chain. In an inventory management software solution, SKUs can also be attached to electronic product information for each item, including manufacturing date, dimensions, and other details.

How to Calculate the Cost of Goods Sold (COGS)

ABVS is a system used by the federal government to award government contracts. Many of these factors are dramatically improved with an effective inventory management system, making inventory software vital for businesses looking to snag government projects. If you don’t know how to read your business financials, including COGS, there are ways you can get proficient at it. You can begin by studying those financial terms online to get an introduction to financials. However, there are companies that help business owners make sense of all of those numbers. Protea Financial has been working with small business owners for nearly two decades.

cogs acronym business

A summary of the revenue, expenses, and other costs incurred over a month, quarter, or fiscal year. The cash accounting or the accrual method is used to prepare P&L statements. Estimates a company’s value and forecasts future cash flow by incorporating the time value of money. DCF is used when making investment decisions and understanding a business’s current and future value.

SKUs, COGS, and FBA Fees: A Guide to E-Commerce Acronyms

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