3/20/2024 0 Comments Cogs equation accounting![]() ![]() For this purpose, Google Trends tool could help you determine seasonality. If you have an problem overselling you should investigate the product’s demand more closely. Should you diversify or change your sources of supply?.Should you change your pricing strategy to boost your sales (speed up inventory turnover)?.Once you know your gross profit and what you have in the warehouse, you can review your strategy: You already know how to do it, but you can also rely on a professional bookkeeper. Solution: First of all, make sure that you can determine an accurate cost of sales and inventory balance. On the other hand, if you run out of stock and can’t fulfill customers’ orders, bad reviews could quickly damage your business. Consequently, you pay too much for storing inventory that you don’t actually need right now. Overstocking means that you have too many products that you can’t sell as fast as you wish. ![]() ![]() Here is a diagram showing the inventory cycle:Ĭhallenges of inventory management in e-commerce (+ possible solutions)īoth scenarios are undesirable. By keeping track of your costs of goods sold, you can identify areas of opportunities for improvement and growth.ĬOGS and Inventory accounting always go side by side. Also it’s worth reviewing your listings and remove unpopular products from time to time. Other miscellaneous expenses associated with receiving your goodsĮvery business is keen to reduce COGS: you should try to find a good supplier with the lowest prices.Shipment: how much did it cost to receive the product to your warehouse(s).If you’re an online seller, besides costs, you pay your suppliers for the products you sell. You won’t be able to estimate how many products are available for sale or what your profit is. Otherwise, you might face great troubles. Cost of Sales and Inventory in E-commerce: Why Does it Matter?Īs a rule of thumb, inventory balances and COGS should be correctly recorded in your accounting system. ![]()
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