Cost Of Goods Sold or COGS tracking is a feature within Link My Books that allows you to keep a track of the cost of the units sold during any given settlement period.
In this article we will cover:
Section 1 - How the COGS feature works
With COGS tracking turned on Link My Books will generate a list of all the products sold as part of each payout from a sales channel.
We use your landed product costs which you input on the product costs page to calculate the monetary value of each of the products sold during a given settlement.
For each payout settlement from a sales channel, we will sum up the total monetary value for all of the products sold during that payout period.
We use this figure to generate a bill to send to your bookkeeping platform which in effect moves this total monetary value from your chosen Inventory Asset account to your chosen Cost of Goods Sold account.
In Xero that would look something like this:
Let's break down the lines of the above bill for clarity.
Line 1 - "Inventory Deduction From Fulfilment by Amazon (FBA)" is the COGS figure being deducted from an asset account, in this case, "Amazon Inventory".
Line 2 - "Cost of Goods Sold Fulfilment by Amazon (FBA)" is the COGS figure being added to a direct costs account, in this case, "Amazon Cost Of Goods Sold".
The bill will always balance off to zero as all we are doing is deducting the COGS figure from an asset account and adding the same figure to a direct costs account - so moving the value from an asset to a direct cost so to speak.
Section 2 - How to set up and turn on the COGS feature
When you turn on the COGS feature you will need to set up a few things before it works properly.
Step 1 - Enter your product costs
On the Product Costs page you will need to enter your landed costs for each of the items you sell:
You can do this on the table on the page itself or if you have a lot of products you can use the bulk upload option:
What you enter as the cost for your products in Link My Books entirely depends on how you currently account for them in your bookkeeping software.
If for example, you account for the "landed cost" of items as:
Product cost price paid to your supplier
+ Shipping from supplier to FBA or your warehouse
+ Import duty
If you are allocating all of the above costs towards an Inventory Asset account then the landed cost you enter on Link My Books should also include all of the above variables too on a per-unit basis.
For example, if on average per unit you paid:
Product cost price paid to supplier = £5.50
+ Shipping from supplier to FBA or your warehouse = £0.18
+ Import duty = £0.40
Your total average cost per unit would be £6.08, so you would enter £6.08 as your product cost on Link My Books.
If however you only account for the cost price of the item from your supplier to your Inventory Asset account and all other costs such as shipping and duty are accounted for using different accounts other than the Inventory Asset account then the cost price you enter on Link My Books should reflect that.
In this scenario, you would enter your product cost on Link My Books taking only the cost price of the items from your suppliers into account and excluding the shipping and duty since that is accounted for separately.
Using the same example above this would mean you would enter £5.50 as the product cost on Link My Books.
Step 2 - Turn on COGS and select your inventory and cost of goods sold accounts
When you turn on the COGS feature on the Settlement Settings page you will be prompted to select a credit account and a debit account.
Your credit account is the account you will use for inventory you purchase from your suppliers.
Your debit account is the account you will use for the cost of goods sold as you sell the inventory.
If you haven't already got an inventory asset account or a cost of goods sold account you can choose to use our default accounts and then we will create them in your chart of accounts for you.
You should check your existing chart of accounts before creating these as you may already have them.
👉 Tip: For Amazon accounts, you will set a credit and debit account for each different fulfilment type:
From here you can also select which types of COGS you'd like adding to the Cost of Goods Sold bill.
A common type that users decide to exclude are the Non-Amazon orders. This will leave only the orders that are actually placed on Amazon are accounted for.
Once changes are made, all settlements that haven't been sent will automatically be refreshed. Any settlements that have been sent, will need to be refreshed, rolled back and resent with the new adjusted COGS details.
👉Tip: For eBay, Shopify & Etsy accounts you will only need to set one credit and debit account:
Once you complete the 2 steps above we will refresh all of your settlements (excluding ones that have already been sent to Xero/QuickBooks) and you will see a new COGS tab on the view settlement pages, as shown below:
If you expand open a COGS bill you can check that the landed cost of each product SKU is accurate and update it if needed as shown below.
If you need to change the currency of your landed costs or want to update all of your products in bulk you can do so from the Product Costs page.
Once COGS is turned on, we will from then on send both the Sales & Fees Invoice and the COGS Bill to Xero/QuickBooks when you click Send Settlement.
If you have any questions about this article or feedback on how we could make it better please reach out to the support team via the blue chat icon on the bottom right of the page or via email to [email protected].