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.
