The cost of sales component allows you to enter costs that are calculated by the amount of sales you make. You can do this on a product by product basis or you can use one Group Cost of Sales component to calculate for multiple products at once.
You will need to start with some income sources already in the plan. Check out the sales forecast guide if you need help with this.
The difference between Cost of Sales and Inventory
Before we start, it is worth understanding when to use a Cost of Sales component and when to use an inventory component.
Cost of sales is used for modelling a direct cost related to a sale. For example, if you are selling products online through an online payment gateway, you may have a percentage charge for every transaction you make.
You may also want to use cost of sales for products you sell to order, where you don't actually hold inventory but just buy what you need based on the orders coming in.
Inventory is used for modelling items that you buy, often in advance, then sell. It has the same direct cost element of cost of sales but it also models the value of stock in your storeroom. This means there is an additional balance sheet element to inventory that is not present when just using cost of sales.
Adding cost of sales
Link to one income component. Click any income component. Press the +Cost of Sales button. This adds another cost of sales component linked below the income component which you can click on to start editing.
Link to multiple income components in a group. Open the add components panel and click Group Cost of Sales. This will add a new component inside the group, it will look at all the income components inside that group to make its calculation.
- This cost can be entered as a percentage of income (derived from an Income component), an amount per unit sold by an Income component, or as an amount
Percentage of income
Cost per unit sold
Calculating individually or at the group level
If all your products have different cost of sales, use the one product method below. If you have multiple products that all have the same cost of sales value use the group of products method. You may also want to use the group method for averaging your cost of sales. If you have a dozen products, you may just want to use a group cost of sales to say they all have about 30% cost of sales to save you time.
- Click on an income component
- Click +ADD COST OF SALES and name it in the list
- Click the new Cost of Sales component
- Enter a percentage. This is a percentage of the sales per month/quarter/year.
- Save Changes
A group of products
- Choose a group with multiple income lines in. Click COMPONENTS
- Click GROUP COST OF SALES and name it in the list
- Click the new Group Cost of Sales component
- Enter a percentage. This is a percentage of the sales per month/quarter/year for every income line in the group.
- Save Changes
Sales = £1000 per month, £2000 per month and £3000 per month
Cost of Sales = 25%
Cost of sales will calculate at £250, £500 and £750 totalled up to £1500 on your reports.