If you've been a long-time reader or a contracting company owner, you've probably heard about "Cost of Goods Sold" (COGS). But what does it really mean, and why is it crucial for your construction business's success? Understanding COGS isn't just about accounting—it's about making smart decisions for profitability, pricing, and more.
1. What is the Cost of Goods Sold (COGS)?
COGS represents the direct costs of creating the products/services your business sells/provides. These include materials, labor hours, and even manufacturing overheads. Any expense that contributes directly to a product's creation is included in COGS.
COGS provides critical insights into your business's efficiency and profitability. It's a fundamental metric showing how much you spend to produce inventory relative to your sales.
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Topics:
Systems And Processes,
Cost of Goods Sold Vs. Expense,
Construction Systems And Processes,
COGS,
Contractor Chart of Accounts,
QuickBooks Chart of Accounts
As a small business owner, you know that managing your finances is crucial to the success of your business. But with so many accounting principles and practices, it can be challenging to know where to start. That's where we come in! This guide will break down the essential accounting principles that every small construction business owner should know. We'll discuss how these principles can help you keep track of financial transactions, create accurate financial statements, and make informed decisions for your business. So, let's dive in, shall we?
Why Are Accounting Principles Important for Construction Businesses?
Accounting principles are the foundation for any successful business. They provide a uniform framework for recording and reporting financial transactions, ensuring consistency and accuracy in your financial records. By adhering to these principles, you'll be able to:
- Make better financial decisions based on accurate and reliable data
- Monitor your business's performance and identify areas for improvement
- Meet legal and regulatory requirements for financial reporting
- Build trust with investors, lenders, and other stakeholders
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Topics:
Construction Bookkeeping,
Construction Accounting,
outsourced construction accounting and bookkeeping,
Cost of Goods Sold Vs. Expense,
Job Costing,
COGS
