How to calculate the true Cost of Goods Sold with shipping of inventory included?

[shopmingei]

We are new to Square. I'm working with accounting trying to figure out the Cost of Golds reports. When we receive inventory, sometimes there is a shipping cost, which I'm entering in when I receive it as a "fee".

However, when we run the COGS report for the month, it is only showing the unit cost of the item, not the averaged out amount of the cost, plus the shipping. 

For example if we order 20 things and they cost $5 each, but then there is $20 shipping cost on the order, they actually cost us $6/each. We used to use Quickbooks POS and it would make a unit cost and an average unit cost that included the shipping cost spread out. 

How can we get the true COGS report. Or, is there a way to run a report that shows the shipping fees entered when you receive inventory? 

[BernadetteA]

Hi there, @shopmingei Sorry for the delayed response. I believe there is a post here on Community where other Sellers have discussed this. I'm going to search for it, and then will merge your thread to it. 

Thanks for your continued patience! I will be updating you as soon as possible. 😊

[Stacelyn24]

Welcome to Square! I understand the importance of accurately tracking the Cost of Goods Sold (COGS) and including shipping costs in your calculations. Here’s how you can address this issue with Square’s inventory management and reporting tools:

Including Shipping Costs in COGS

Currently, Square's inventory management system might not automatically average the shipping fees into the unit cost of items. However, you can manually adjust the costs to ensure accurate COGS reporting. Here are a few steps you can follow:

1. Calculate the Adjusted Unit Cost Manually:

   • When you receive inventory, calculate the total cost including shipping.
   • For example, if you order 20 items at $5 each, and the shipping cost is $20, the total cost is 20×5+20=12020 \times 5 + 20 = 12020×5+20=120.
   • The adjusted unit cost is 120÷20=6120 \div 20 = 6120÷20=6.

2. Enter the Adjusted Unit Cost:

   • Instead of entering the unit cost as $5, enter the adjusted unit cost as $6 when receiving inventory in Square. This way, your COGS report will reflect the true cost per item.

Tracking Shipping Fees Separately

If you prefer to track shipping fees separately and want to ensure they are accounted for in your reports, you can use the following method:

1. Record Shipping Costs as Separate Expenses:

   • Use Square's expense management features to record shipping fees as separate expenses.
   • This helps in keeping a clear record of all costs associated with inventory.

2. Run Detailed Reports:

   • Use the reporting tools in Square to generate detailed reports on expenses, including shipping fees.
   • While this won’t automatically adjust the unit cost, it will provide a comprehensive view of all costs incurred.

Custom Reporting Options

If these methods don’t fully meet your needs, consider these additional options:

1. Third-Party Integrations:

   • Integrate Square with accounting software that supports more detailed COGS calculations, such as QuickBooks or Xero.
   • These integrations can help automate the inclusion of shipping costs and provide more advanced reporting capabilities.

2. Custom Solutions:

   • If you have specific reporting requirements, consider using a custom reporting solution or working with a developer to create a tailored report that includes all necessary cost factors.

Step-by-Step Summary

1. Calculate Adjusted Unit Cost:
   • Determine the total cost of inventory including shipping.
   • Calculate the adjusted unit cost.
2. Enter Adjusted Unit Cost in Square:
   • When receiving inventory, use the adjusted unit cost to ensure accurate COGS.
3. Track Shipping Costs Separately:
   • Record shipping fees as separate expenses for detailed tracking.
4. Generate Detailed Reports:
   • Use Square’s reporting tools or integrate with accounting software for comprehensive cost tracking.

By following these steps, you should be able to get a more accurate representation of your COGS, including shipping costs. If you need further assistance, don’t hesitate to reach out to Square’s customer support for personalized help. 🙂

[shopmingei]

Hi,

Thank you for the detailed response. I wish Square would integrate the shipping cost into the unit cost--it would be a great feature and I'm sure one that would be very helpful for all users who closely track their COGS and want an accurate, total cost.

Yes, we thought of the work-around of doing the math manually. Your example is quick and easy math. But when you order 200+ items and shipping isn't an amount that divides equally, it makes inputting and writing a Purchase Order way more time consuming.
For example: our last order had 27 different items of different costs, with quantities that added up to 236 total units, and a shipping cost of $436.84. When you divide that, you get $1.[Redacted]52542. So now I'd have to round that down, add $1.85 to the cost of the 27 different items, and then account for the difference left over due to all the decimal points I couldn't include in the unit cost. That's a lot of work and that's just one order.

And as far as the reports go--this is exactly my question. What report shows the "fees" that I enter upon receiving merchandise? "Fees" is currently how I include shipping at the time of receiving and I haven't been able to find a report that shows those. If we could generate that report, it would help accounting adjust for shipping on their end.