The ending inventory<\/b> is the value of goods still available<\/b> at the end of the accounting period.<\/li>\n<\/ul>\nCOGS: Alternative Calculation Methods<\/h2>\n
There are several methods to calculate COGS. Each has distinct characteristics and should be used based on your business objectives: FIFO, LIFO, and Weighted Average.<\/p>\n
FIFO (First In, First Out)<\/h3>\n
The FIFO method assumes that the first items purchased are the first to be sold<\/b>. It is particularly suitable for businesses that sell perishable products or manage fast-turnover inventories. It is also useful for companies operating internationally as it provides a more realistic picture of stock costs during periods of low inflation<\/b>.<\/p>\nLIFO (Last In, First Out)<\/h3>\n
With the LIFO method, the last items purchased are the first to be sold. It benefits companies facing high inflation. Industries like oil or wholesale trade are particularly affected. Using LIFO, the cost of goods sold is calculated based on recent prices<\/b>, which are often higher. This reduces taxable income.<\/p>\nWeighted Average<\/h3>\n
This method calculates an average cost of the items in stock. It is ideal for businesses with homogeneous inventories or those operating in stable markets. SMEs or companies looking to simplify their accounting often use this method to avoid sudden fluctuations in COGS<\/b>.<\/p>\nHow to Optimize Your COGS?<\/h2>\n
To optimize your company’s COGS, several levers are available: optimizing purchase costs, improving productivity and inventory management, and reducing waste.<\/p>\n
Optimize Purchase Costs<\/h3>\n
To reduce COGS<\/b>, start by negotiating with your suppliers. Look for partners offering more competitive prices or get better terms with your current suppliers. Buying in bulk or seeking promotions and attractive offers are other solutions to consider for optimizing your COGS. You can also negotiate payment terms to pay as late as possible or obtain lower deposits.<\/p>\nEnhance Production Efficiency<\/h3>\n
Maximize your productivity<\/b> to positively impact your cost of goods sold. To achieve this, explore several options:<\/p>\n\n- Investing in automation technologies;<\/li>\n
- Improving processes to reduce waste;<\/li>\n
- Training your workforce.<\/li>\n<\/ul>\n
Effective Inventory Management<\/h3>\n
Improve inventory management to minimize costs related to surpluses and shortages. To achieve this goal, use a comprehensive inventory management system<\/b> to accurately and real-time track stock levels.<\/p>\nMinimize Waste<\/h3>\n
Finally, reduce waste in your production process. Identify stages where raw materials are wasted and implement measures to minimize or eliminate these losses. Recycling used materials should also be considered to achieve your COGS objectives.<\/p>\n
Mastering Your COGS: A Must for Maximizing Business Profitability<\/h2>\n
Understanding how to calculate the cost of goods sold is a crucial step to evaluate and improve your company’s profitability. To go further, opt for an in-depth analysis of your production processes to identify new optimization opportunities. Our experts are available to support you in this process, helping you maximize margins and strengthen your business’s competitiveness.<\/p>\n","protected":false},"excerpt":{"rendered":"The term COGS is the acronym for “Cost of Goods Sold,” which means “co\u00fbt des marchandises vendues” in French. This accounting element is essential for understanding a company’s financial performance. What does this calculation entail? What does it reveal? What are its applications? Here\u2019s everything you need to know.\r\n","protected":false},"author":2,"featured_media":1033,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-1596","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/posts\/1596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/comments?post=1596"}],"version-history":[{"count":3,"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/posts\/1596\/revisions"}],"predecessor-version":[{"id":1597,"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/posts\/1596\/revisions\/1597"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/media\/1033"}],"wp:attachment":[{"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/media?parent=1596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/categories?post=1596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mwtsourcing.com\/en\/wp-json\/wp\/v2\/tags?post=1596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}