With A2X you can choose how you group your COGS entries. By default, they will be grouped together, however, you can choose to group your COGS by product type.
This function also works with Xero or QuickBooks tracking categories/classes, which means can elect to specify a tracking code for each product type grouping of your COGS entries.
Please note: If you are interested in applying tracking categories/classes, please reach out to our support team to enable this feature on your account.
Why do group by product type?
There are lots of different reasons, your financial adviser or tax adviser can help you choose when it is appropriate. One example where A2X users use this option is baby products in the UK. They are VAT exempt, so they get pulled out and accounted for differently on the invoices.
Some users also use this option to track broad categories of products in their P&L reporting for management.
The “Group by Product Type” option works well if we have consistent formatting in your SKUs or a SKU list that’s not changing too often.
What are product types?
Product types are a way of grouping together similar products by creating groups of SKUs.
Let’s assume we have 100’s of different sizes and colors, but we need to track them by brand, perhaps for tax reasons or for accounting reasons – for example, we split brand sales in our profit and loss reporting.
How to Set Up Product Type Grouping for COGS
STEP 1. Add product type(s) in A2X
Go to Settings > Product Types and add your product type(s). Please click HERE for more information on creating product types.
STEP 2. Select the 'Sales by product type' invoice setting
Go to Settings > Invoices and under Sales Grouping, select Sales by product type, then click Update Invoice Settings to save:
STEP 3. Enable COGS
Go to Settings > Cost of Goods Sold and select Enable, if not already done.
Now you will be able to specify accounts for each product type on the Cost of Goods Sold page:
How to Enable Tracking Categories/Classes (Tracking Codes)
This feature also works with the tracking categories/classes function in your Xero or QuickBooks. If you are interested in applying tracking categories/classes, please reach out to our support team to enable this feature on your account.
Log into the Xero/QuickBooks company connected to your A2X account and ensure there are one or more tracking categories/classes set up. Once done, go to Settings > Connections in A2X and click Refresh Cache.
Next, go to Settings > Invoices and select a default tracking category/class, then tick the checkbox under Advanced and click Update Invoice Settings to save:
Now you will be able to specify tracking codes (i.e. categories/classes) for each product type on the Cost of Goods Sold page:
Lastly, be sure to refresh the existing payouts that you wish to have these updates:
Now when you review a settlement or send a COGS invoice to Xero/QuickBooks Online, you will be able to see the new grouping behavior.
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