New! COGS and Schedule C Guidance
Today we released a major update to the way we calculate and attribute manufacture costs to orders. This change means that we can now calculate your Cost of Goods Sold (otherwise known simply as "COGS") and for US Tax payers, we can now provide detailed tallies suitable for use on your Schedule C.
Before we delve into the detail on our new reports themselves, let's go through the major changes we have made in order to be able to deliver this new functionality:
Manufacture Cost for Orders
Previously, we calculated your estimated manufacture cost from the total cost of your recipe. This cost was applied when your order was created / imported and was based on the current total cost of the recipe. This was fairly accurate in cases where your unit costs didn't fluctuate too much, but wasn't so great for backdating past orders as they would be assigned your current material cost rather than the material cost at that point in time.
Now, we calculate your material costs via your manufacture and order history using a rolling average. This provides a much more robust and accurate cost allocation to your orders as it allows us to calculate your material cost for any point in your manufacture history.
We've also replaced the shipped status on orders with a date - this now allows us to calculate exactly when we should attribute the material cost for the order. We've run some updates to ensure that orders that you have already marked as shipped continue to be marked as such, however in order to ensure that your COGS / Schedule C tallies are correct it is advised that you review your past orders to ensure that they are marked with the correct shipping dates.
Inventorable / Non-Inventoriable Materials
Another change required for this update was a rename of consumable / non consumable materials. Going forward, we now refer to materials as either "inventorable" or "non-inventorable".
Inventoriable materials are ones purchased for use directly in the manufacture of your products for sale. Non-inventorable materials are defined as any other material that you wish to track in the system.
Inventorable materials are thus included in your costs of goods sold calculations, whereas non-inventorables are considered a "indirect" expense for reporting purposes.
You'll however notice that both work in a very similar manner as before, however their costings will be applied differently going forward. As with the old non-consumable materials, non-inventoriable materials have no stock tracking or unit prices. They can still be added to recipes as a no-cost material if required.
We completely understand that is a big change, so if you have any questions please don't hesitate to get in touch and we'll be happy to explain further.