Cost of goods sold (COGS); or cost of sales, refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.
CALCULATION for COGS*
COGS = BEGINNING INVENTORY + P - ENDING INVENTORY
P = PURCHASES DURING PERIOD
*IMPORTANT: COGS only applies to those costs directly related to
producing goods intended for sale.
The COGS is an important metric on the financial statements as it is subtracted from a company’s revenues to determine its gross profit. The gross profit is a profitability measure that evaluates how efficient a company is in managing its labor and supplies in the production process.
Cost of goods sold (COGS) is the direct cost attributable to the production of the goods sold in a company.
COGS is deducted from revenues (sales) in order to calculate gross profit and gross margin.
The value of COGS will change depending on the accounting standards used in the calculation.
COST OF GOODS SOLD IS KEY
TO MAKING A PROFIT.
The best way for a small business to make a profit is by saving on costs. Overhead costs are important, but COGS directly correlates to the efficiency of your business and your business' ability to make enough money to cover ALL overhead expenses and then some [sum]...
REVENUE – COGS = GROSS PROFIT
GROSS PROFIT – EXPENSES = NET INCOME
The result of supply and demand economics creates a challenge for small businesses, because generally small businesses do not buy as many materials from vendors as big businesses do. Therefore, big businesses get better materials pricing for which they base their pricing, and in-turn make it difficult (and in some instances impossible) for a small business to win a bid or be a low bid against a big business.
POWER IN NUMBERS
JOIN KINETIC CAPITAL'S PURCHASING COALITION AND SAVE ON PRODUCT COSTS, FOOD COSTS, PAPER PRODUCTS, JANITORIAL SUPPLIES, CONSTRUCTION MATERIAL PRICING,
Group Purchasing Organizations (GPO's) or buying groups, offer products and services at significantly reduced pricing on the condition that a minimum number of buyers would make the purchase. A buying group is an organization made up of small businesses that band together so they can negotiate as a larger group with vendors to receive better pricing and terms on goods and services. As a small business owner, money is always at the front of your mind. Reducing expenses and smart financial management are essential to success.
There are many benefits to joining a purchasing group, such as lower cost of goods purchased from vendors, lower shipping costs, centralized ordering, and support from the organization itself. Due to the economy of scale, manufacturers and suppliers will often give preferential rates and discounts for buying in bulk. The purchasing group then passes these savings back to its members, meaning reduced costs for you.
Kinetic Capital LLC, plays an active role in supporting and furthering the interests of our small business members. We strategically leverage the relationship capital that results from forming the GPO's to support our members in other ways.
PRODUCT BUYING GROUPS
CLICK ON YOUR INDUSTRY AND SEE IF WE HAVE A GROUP YOU'D LIKE TO JOIN.
IF YOU WOULD LIKE TO SUGGEST AN ADDITIONAL MARKET OR INDUSTRY PLEASE CONTACT US BELOW.