Cost of Goods Sold is a feature in A2X that will calculate the total cost of the products you sell on Amazon for each settlement period and send the transaction to your accounting system so that you can correctly record the changes in inventory and cost of sales. This will give you an accurate view of your gross profitability and margins directly in your financial reports.
An overview of our Cost of Goods Sold feature can be found HERE
Please note: The Cost of Goods Sold and FBA Inventory Valuation features are available as part of our Starter plan and higher.
To enable this feature you will need to go to your A2X account settings page as shown below:
Once the Settings menu opens you can then select Costs.
Select Enable Cost of Goods Sold:
The Cost of Goods Sold entry that A2X sends on to your accounting system will deduct the overall cost of goods sold value for that period from your inventory asset account balance and allocate it to your cost of goods sold expense account. So the next step of the set up is to map the Cost of Goods Sold Expense account and the Inventory Asset account.
Your accounting system may already have a Cost of Goods sold expense account which can save you having to create another one if you don't necessarily need to. If your accounting system has a default Cost of Goods Sold account then you can simply map that in the cost of goods sold expense account field in A2X, as shown below:
The Inventory account is a little different. The default Inventory account in accounting systems is generally reserved for the accounting systems internal inventory functions therefore it is best to create a new Current Asset account* called Amazon Inventory in your accounting system.
* Learn how to create the Inventory Asset account in Xero HERE
* Learn how to create the Inventory Asset account in QuickBooks Online HERE
The new inventory account can then be assigned in the Asset Account section of A2X, as shown below:
Lastly, click Save Settings.
You can account for COGS on one level or expand to other levels if you business requires this level of tracking.
Example accounts are below:
It is now time to input your Product Cost Prices.
There are two ways you can provide A2X with your cost price data.
The first method is the manage costs tab within A2X.
Click Costs as shown below:
On the Manage costs tab A2X may have already found a number of SKUs from your account. If you don't see any or all of your products listed you can initiate a refresh by clicking 'Refresh SKUs'.
This will search recent settlements, and recent inventory (if you have FBA inventory) for SKU's.
Once you see each of your Amazon SKU's listed, you can manually type in the cost price for each, as shown below:
Once you have entered all cost prices, click Save Costs:
The second method for providing cost prices is a manual .csv file upload.
On the Advanced Costs tab you will see a link to download either the 'current cost template' or an example template. The current cost template is great to use if you have refreshed the SKU's in your A2X account. A2X will provide you with a template of all the SKU's we see in your account so all you need to do is enter the cost prices.
Once you have populated your template with the cost prices it is now time to upload it to A2X.
Once the cost prices are uploaded to A2X you will need to refresh the settlements in your A2X account. This can be done by either clicking the 'Refresh' button beside each settlements of by enabling bulk actions which you can learn more about HERE
Once you have refreshed all the settlements in your account you will be able to click review and then open a Cost Of Goods Sold settlement.
The number and cost of items sold in the three categories now show:
When you send the cogs entries over to Xero, they can be found in Draft Bills. All you need to do is click Approve!
When you send them over to QuickBooks Online, they are found in the Journals just like the sales entries, but split between the various inventory and COGS accounts.You don't need to do anything with the COGS entries once they reach QuickBooks.
Reviewing and Sending COGS invoices to your accounting system
After you enable COGS in the A2X settings, and upload your costs and configure your asset and expense accounts, you can click Review to see the details of the COGS for that period, and send the data to your accounting system. The COGS entries will appear below the usual Sales and Fees entries, you will see one or two entries depending on whether the settlement period spans more than one month.
Each Amazon settlement is processed, the quantity of product sold is calculated and the cost value of the product is totalled into invoices in the same way as the sales and fees. You can configure A2X to include or exclude the non-Amazon shipments, which allows COGS calculations for non-Amazon sales shipped from Amazon FBA. You can upload different cost data and refresh a settlement to have A2X re-calculate the new cost of goods sold values by clicking Refresh.
At an accounting report level, a balance sheet report in your accounting system will show you your closing stock balance as at the end of any month or period and your profit and loss report or income statement will show you the total cost of goods sold expensed.
Click HERE to head over to our COGS & Inventory support centre where you can find more articles relating to the use of A2X's Cost of Goods Sold and FBA Inventory Valuation features.