Does this make me sound like a jerk? Here’s what I truly believe:
“Most of you are confused about COGS…
… and you don’t even realize it.”
That’s rather bold of me, don’t you think? After all, I don’t know YOU. Who am I to tell YOU what YOU are confused about?!
I also realize this: I work with many clients across the nation, and when they come to me I see over and over that they don’t understand how inventory and COGS work together in QB. This costs them money every single day!
So here is my COGS quiz for you. Can you answer these questions? No cheating! 🙂
- I have a negative inventory and my COGS is wrong. What happened?
- When entering my inventory, should I choose COGS or Inventory Asset under ‘Purchase Information’ when setting up the items in the Items List?
- I was looking at my profit and loss report. I double clicked on COGS and saw information from both accounts receivable and accounts payable. I don’t think this is right. Shouldn’t COGS only list accounts payable information?
- Is COGS an asset?
- Sometimes I buy things for my customers. I want to post the purchase to COGS, but the Billable checkbox does not work. Is this a bug?
Bottom line is that if you can’t answer these questions then you have no way of knowing if YOUR inventory and COGS are being tracked accurately in QuickBooks.
And I can almost promise that your tax preparer or CPA is NOT examining YOUR day to day bookkeeping… so that person also doesn’t know if YOUR COGS is accurate. (oh boy there I go making another BOLD statement!)
Remember: QuickBooks does NOT use the traditional COGS formula to track your COGS. Too little COGS = too much taxes.
To your success,
P.S. Heads up to QB 2007 users: important services are being discontinued on May 31:
- Emailing invoices & P.O.s
- Banking & credit card downloads
- Merchant accounts
- QB bill payment
- other services
All being discontinued. Upgrade now for a smooth transition.