Cost of sales: calculation and importance

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Knowing the key financial indicators of our business is crucial to know what is going well and where adjustments need to be made. One of these KPIs is the cost of sales, also called the cost of goods sold . This metric is important in sales and marketing because it allows us to know if the price you are charging for your products or services allows you to have a profitable business or not. While the best software for managing sales can help you measure this indicator, you also need to buy sms list its importance, value, and how to improve it. In this post we tell you more about the cost of sales , we give you some examples, we teach you how to calculate it, among other relevant data around this indicator.

What will you find in this text?

What is cost of sales?
Why is cost of sales important?
How is cost of sales calculated?
Is it possible to reduce the cost of sales?
What is cost of sales?
Cost of goods sold (COS) is the total expense your company incurs to manufacture or acquire a product that will then be sold. In other words, it is what it costs to create or purchase the product before selling it.

For example, if our business is engaged in the production of cakes, the cost of sales would include ingredients such as flour, sugar and eggs, the salary of the staff who make them and direct expenses such as the electricity used to bake them. This calculation is key to knowing how much we are really earning for each sale.

Cost of sales. Examples:

Here we share two more examples to help you understand what cost of sales means in different areas:

Cost of sales for software : If your company's product is billing software , the cost of sales (COS) would include expenses directly related to the development and maintenance of the software. For example:
The salaries of the developers who created the software.
Licenses for tools or platforms required for programming.
Servers or cloud infrastructure for the software to run.
It does not include expenses such as marketing, administration or office rent, as these are indirect costs. Thus, the CDV helps you understand how much it costs to offer the software to customers and calculate your real profits.