COGS Calculation: Finding the best path to profitability

We have the entire crew together today, which we're really happy about. As part of this webinar you'll get to see a lot of fun faces. There'll be three separate individual companies all represented. Incidentally, my two very favorite partners are both on this webinar with us today. I feel like it's kind of like a family reunion. That's how much fun it is for me to have all of these people on the call with us today.

0:29 Brittany Brown

So let me introduce the lineup you guys are going to get to interact with today. On our side we have Karlie, who is the person who runs our inventory team here at LedgerGurus. And then we have me, the CEO. I'll be acting as the host and the moderator, and you'll get to hear me give a few spiels on various things accounting.

Then we're going to hear from Zach on the Finale side. He's their customer relationship manager. Tamara on the Finale side, she's their Director of Sales and Strategic Accounts. And Geoff is the new face to this webinar. Geoff is the head of marketing at A2X.

1:08 Brittany Brown

Like I said before, my two favorite partners on our call with us today. Both, I mean, just such great minds involved in this. Such great partners. One of the things I love about both of the partners we have on today is they really do partner relationships really well. They've turned our relationships into more than just partnerships. They're also now true friends. And I can't wait for you guys to get to hear from them today.

1:32 Brittany Brown

So before we totally launch into this, we're going to go into a poll to just sort of give us a little bit of framework for who you guys are that are on the webinar today, and help us understand how we can best serve you by really directing our comments to the audience today.

So please just take a few moments and answer this poll. Really, what we're asking you is if you own a consumer business, or if you're in the accounting space, or if you're kind of a hybrid between the two of them. Go ahead and just take a second to answer the poll. We're not going to stay on here for very long, so just make it quick, people. Make it quick.

2:02 Brittany Brown

And Kelley, I'm assuming we get to see the results of the poll, correct?

2:07 Kelley Birrell

Yep, just a moment. People are still coming in.

2:13 Brittany Brown

Okay, awesome.

The other thing I want to make very clear as you guys are taking the poll questions, these webinars have been a really great opportunity for people to get a lot of great questions answered. These are people who charge a lot of money for their time, and this is an opportunity for you guys to basically have access to their minds for free.

2:37 Brittany Brown

So we would like to invite you guys to start submitting your questions through the Q&A as quickly as you possibly want to, because our goal is to really get to every single question that you have today. So please make sure you go ahead and get those submitted, so we can best serve you.

Kelley, poll results. Oh, there we go. Awesome.

2:56 Brittany Brown

So most of you who are with us today own a consumer product business, and it looks like the second most represented group are accountants who are supporting probably ecommerce businesses. So that's a great combination of people.

3:09 Brittany Brown

So let's talk about what the agenda is going to be today. If you have not had a chance to watch the previous two sessions that talked about really great things like the three-way match, internal controls, how to make your operational functions around accounting more streamlined and around inventory tracking more streamlined, please go back and watch those.

The whole series was meant to be taken in as part of a series. Our goal was to truly educate and serve. And so they were not salesy at all. We are not trying to sell you guys on anything. Although we are great, and so is A2X, and so is Finale, but that is not the purpose of this. We invite you to go back and watch those other webinars if you haven't had a chance to watch them already.

3:47 Brittany Brown

I'm going to quickly introduce LedgerGurus. LedgerGurus is an accounting firm that is focused on the needs of ecommerce businesses. So we go really deep on all the things that you would expect us to go deep on. Really deep on inventory counting and tracking, sales tax compliance, channel reporting. And our real goal primarily is that our clients are more successful, that we're the best business decision our clients have ever made. So our goal is to help them be more profitable. Profit driven financial insights, and really set up to help ecommerce businesses succeed.

4:20 Brittany Brown

So now I'm going to punt it to Tamara, who's going to introduce Finale.

4:27 Tamara

Yeah, thanks so much, Brittany. So Finale Inventory is actually an operational tool, and we were designed to eliminate inventory chaos. We've helped thousands of businesses since 2009 take control of their stock, streamline operations, and also scale their businesses.

Our goal is actually to empower ecommerce businesses so that they can grow without inventory and operations slowing them down. I like to say that we're packed with tons of automation tools, real-time visibility across selling channels like Shopify, Amazon, FBA, and TikTok to name a few. And last but not least, we offer free hands-on training, and our support is world class.

5:09 Brittany Brown

Yes, it is. Both of these partners' support is world class. And it might actually be, this is the other reason why they're probably my favorite partners. Both of these partners' support is world class, which as you guys know, as you're trying to operate businesses, especially in the inventory space and the channel reporting space, if your support cannot help you resolve your problems, you're basically dead in the water.

So let's have Geoff introduce A2X.

5:35 Geoff Gualano

Thanks, Tamara. Thanks so much for having me, Brittany. I'm excited to be on here with the amazing LedgerGurus team and the Finale team.

As Brittany mentioned, my name is Geoff. I'm the head of marketing here at A2X. And if you're unfamiliar with A2X, we actually do something that seems really simple, can feel relatively complicated if you're in it manually, but when you're using A2X, not so much.

5:55 Geoff Gualano

If you're selling on Amazon, Shopify, eBay, Etsy, or Walmart, and you get a payout on your bank feed in QuickBooks, or Xero, or whatever accounting software, we just take that data, organize it into the appropriate chart of accounts, post it as a summary into your accounting software, and then click reconcile. One click.

6:18 Geoff Gualano

We work with the top ecommerce accounting and bookkeeping experts in the world, which LedgerGurus, I'd categorize in the top 1% of ecommerce accounting practices. So they trust in our accuracy and our automation. And as a result, folks that are working with practices like LedgerGurus get to benefit from accurate financial data. And if you're not, and you're doing your own bookkeeping, you could also use A2X.

6:42 Geoff Gualano

So when we say award-winning, by the way, we didn't just make that up. We did win a few awards in 2024, which is cool. We won Xero's practice app of the year award, which was a lot of fun. Sometimes award-winning can be misleading, but I just wanted to tell you it's legit.

6:54 Brittany Brown

Legit. I can vouch for that. It's legit. Whenever someone comes to us and they're using any tool besides A2X and they're telling us all the problems they're having, we're like, why are you using something besides A2X?

7:07 Brittany Brown

So I want to just give a shout out to Joey Adams for being the first question of the day. Congratulations to Joey. Kudos to you. Good job taking us up on our offer to basically give you free access to our minds for the next hour. Please feel free to submit your questions.

7:24 Brittany Brown

Let's go over what this agenda is going to be, but also I want to call out the fact that Kelley dropped in the chat the link to the other two webinars that led into this. The first one, the financial impact of inventory, how inventory shapes your business's bottom line. And the second one, purchasing and the three-way match, effortless purchasing, clean records, and seamless recording. So again, make sure you watch those if you didn't have a chance to watch them earlier.

7:47 Brittany Brown

So the agenda for today will be, we're going to talk about what is cost of goods sold, the difference between COGS and cost of sales. This is a really fascinating thing, incredibly important to the success of ecommerce businesses. Why it matters that you do this right, why you want to automate COGS, and options you have for calculating COGS. In particular, partnerships between the two app partners we have today and what it means for you guys, and why we're really excited about that.

8:17 Costing frustrations, and what COGS includes

Brittany Brown

So we're going to jump into the first discussion. Karlie is going to take us through what you're likely to see as some of your top costing frustrations as you really begin to lean into this.

8:22 Karlie

Thanks, Brittany. Like our last couple webinars, we kind of started with talking about the frustrations we see as people come to us with help in inventory accounting. And one of the big ones obviously is costing. Lots of frustration here.

As we start to talk to them about their inventory, we ask them how they are determining their product cost. And a lot of them aren't quite sure. We'll ask them if they're using a landed and a buy cost. They're not sure what that is, and what can be wrapped into a product cost, or if they can include tariffs and duties or shipping, and then even how they do that.

8:52 Karlie

And then they get frustrated with all the fluctuations they're seeing in their costs, and having to recalculate them all the time. Or do they not? Do they wait till the year? And so there are a lot of frustrations there.

A lot of it's just not even knowing what COGS is, and what's the difference, like Brittany said, between COGS and the cost of sales, where that falls on the profit and loss, what should be categorized where. Lots of frustrations as we try to talk with them and get that ready, and remembering that inventory accounting really blooms from operations. So the cost and product cost is all in their operations.

9:34 Karlie

So I'm going to kick it back to Brittany to discuss the biggest thing, the calculating COGS.

9:41 Brittany Brown

Yeah. So I'm going to start also by just defining this, just so we're all on the same page. If you're working with inventory, you're probably familiar with this, but there are probably at least a few of you that are kind of new to owning a product based business, and terminology could be really helpful to understand.

So first of all, COGS, cost of goods sold, meaning that we're only going to expense what was actually sold, as opposed to expensing everything we've purchased to sell. Instead, it's going to sit on the balance sheet until we're ready to sell it, and after it's sold, it's going to be expensed through cost of goods sold.

10:05 Brittany Brown

The equation that I learned in college when I was learning about accounting, that still really holds true and really helps us understand what's really happening from a movement of inventory perspective, and incidentally a way that you can back into a cost of goods sold calculation. If you think about it in terms of algebra, one equation and one unknown means you can solve for any of these pieces. I can't tell you how many times Karlie and I at least have used this equation to solve for something that we needed to solve for.

10:41 Brittany Brown

So the equation is basically, and if you remember back in algebra, you can change the order of this in any way you want to isolate the variable that you actually need to solve for. It's actually a very handy equation to have on hand.

Cost of goods sold is also the same thing as opening inventory, which represents the value of what you started with during the period of time you're trying to cost for, plus the purchases that were actually purchased during that period of time, the value of all new inventory bought, minus the inventory you have left at the end of that period, equals COGS.

11:06 Brittany Brown

So whatever you're trying to solve for, one of the most common ones that we have to solve for is ending inventory balances, or purchases during the period of time. Any of these can be isolated as the piece that you're trying to solve for.

But I would just write this equation down, or take a quick screenshot of this, because it's one of the best ways to clean up things if you're not sure where you stand. Take the known, solve for the unknown, clean the system up, move forward, and begin again with a new frame of mind.

11:39 Brittany Brown

So what is included in cost of goods sold, this very important number?

Well, the first part of this is always going to be the buy cost. This is going to be what you actually paid your vendor for the product. Think about it in terms of, if I was to buy something from China, whatever that vendor is charging me per SKU would be considered my buy cost.

12:00 Brittany Brown

But then in addition to that, if you really want to have a really clear picture of how you're doing from a profitability perspective, and what your cost of goods sold are as well, you're also going to want to consider landed costs. So these are all of the costs to purchase and deliver the products to your warehouse. These are not the costs, by the way, to have those products leave your warehouse. That's going to be part of what we include in cost of sales, which Geoff's going to talk about in just a minute.

12:24 Brittany Brown

But this is going to include things like what you paid for the product, the cost to ship those products across the ocean and truck them to the warehouse wherever it is, the packaging that it takes to get those products to you, and any tariffs and import fees that you might incur along the way. Of which, I'm sad to say, it looks like they're going to be going up. So it's going to become even more important for you guys to be tracking by landed costs to have a really clear picture of what's happening with your cost of goods sold.

12:55 Brittany Brown

Now, one of the most common arguments we have with our clients is that they want to include in cost of goods sold a lot of stuff that shouldn't be included in cost of goods sold, because they understand the relationship that there is a fundamental cost of selling that stuff, and they want to include all of that in cost of goods sold. That is not considered cost of goods sold, and there's a reason to keep that relationship more clean.

13:20 Brittany Brown

What I invite you guys to think about is this concept called cost of sales, which Geoff is now going to go into detail on what that means. But you guys are right, you definitely are understanding clearly that there is a significant piece of this that you need to be aware of. So Geoff, why don't you build upon this idea of cost of sales?

13:44 Cost of sales, and laying out your P&L

Geoff Gualano

Hey Brittany, did you say Geoff or Jess?

13:47 Brittany Brown

Yes, sorry. Geoff. Yes, Geoff.

13:50 Geoff Gualano

Okay. Sorry about that.

So cost of sales, all of the costs to sell your products and get them to your customers. So that typically includes things like marketing, merchant and payment processor fees, packaging to customers, shipping to customers, and then other indirect costs.

14:07 Geoff Gualano

I think one of the recommendations that we tend to make is clearly identifying what these costs are and what's included, with your accounting partner, when setting up the relationship. That's of critical importance. And then also, there's a big alignment opportunity here in terms of understanding what's included within these, because as Brittany mentioned, that tends to be one of the more challenging back and forths between clients as well as their accounting partners.

14:42 Brittany Brown

Yeah, great. So one of the things that we invite our clients to do, in order to be able to give them visibility into both the concept of cost of goods sold and cost of sales, is to change the way they represent it on their financials.

The reason why we invite you to not just dump all of your cost of sales into cost of goods sold is because this relationship between what it costs you to actually sell your product, in its fundamental form of buy this product and sell this product, is a really important thing to keep track of.

15:15 Brittany Brown

One of the things I like to do is give a scenario of basically saying, if I was to buy a blanket for $100 and I was to sell that blanket for $80, I will never make a profit in my business. I am literally losing $20 every single time I sell a blanket. And no action I ever take will ever put me in a profitable position.

15:39 Brittany Brown

A lot of times our clients who are not tracking clear cost of goods sold will assume that if they just drive their sales up higher, I'm just going to pour a bunch of money into marketing, I'm just going to pour a bunch of money into driving sales up, it will solve the financial position I find myself in.

But 100% of the time, if you are not fundamentally selling your product at a profit, you will never succeed as a business. And driving up the speed of sales will only drive up the speed of your bankruptcy.

16:06 Brittany Brown

So this visibility you have into what it is really costing you to sell your product on the fundamental product level is a very important thing. But that is immediately followed by the importance of this concept that Geoff was talking about, the cost of sales.

And one of the best ways to think about this cost of sales is, anything that is a true variable cost, meaning the more my sales go up, the more I'm going to incur these costs, versus fixed costs that don't really move in relationship to sales.

16:38 Brittany Brown

So as Geoff was explaining this list, one of the things that you guys probably were able to see in common here is that every single one of these fluctuates in perfect correlation to the sales. I can't sell a product on an online platform without incurring some sort of payment processor fee. And what I'm incurring in payment processor fee is going to have a perfect correlation with the level of my sales. If my sales triple, my payment processor fees are likely to triple.

17:03 Brittany Brown

As opposed to maybe the rent on my warehouse. That is not going to fluctuate in the same way, and there's not going to be this perfect correlation between my warehouse costs and my sales. It's not going to go up and down. It's not going to follow each other through.

17:16 Brittany Brown

And so when you're looking at this cost of sales, one of the things we invite our clients to do is to combine it into a subcategory called cost of sales, right below cost of goods sold, of every single one of these categories that have a perfect variable correlation with sales. Have it set up in a way where it's all collapsing into one category called cost of sales. And that will give you the ability to not only see your cost of goods sold, but also see your cost of sales in a really clear way.

17:54 Brittany Brown

So this is just an example of how we recommend you lay this out. You notice Stephen is on the bottom right of the corner, our COO. This is a great video he put out, cost of sales versus cost of goods sold. That's on our YouTube channel. If you want additional information about this, I recommend going and finding that video to learn more about this.

18:14 Brittany Brown

Karlie, why don't you take us into the topic of when COGS is going wrong?

18:20 When COGS goes wrong, and why it matters

Karlie

Yeah. And just to piggyback off what you were saying there on the financials, another big piece for me is calculating your gross profit margin and making sure that's just based on your cost of goods sold. And then, how much money do I have left to cover the rest of those costs? If they're wrapped up in the top, it kind of skews it. So organizing your P&L really helps.

18:45 Karlie

So we know that the cost of goods sold is the biggest expense for most businesses, and if you don't get it right, a lot can go wrong.

You might think you're making money, like Brittany talked about, but you're actually losing it. If you don't know how much your products really cost, you could sell them cheaper and lose money.

19:04 Karlie

We had a client come to us just recently that was selling a lot, but they weren't making any money. So we did a COGS analysis, and some of their top products, we showed them, were actually given a price lower than the cost. So even though they were selling a ton, they weren't making any money, because they priced it wrong.

19:21 Karlie

It's another big thing that can go wrong. You might set prices too low and lose money.

Another thing is you could run out of cash. If you spend too much money on inventory without knowing your actual cost, you won't have enough money to cover your other expenses. And if you spend too little, you might run out of stock and miss out on sales.

19:39 Karlie

Another thing that could go wrong is you might have too much or too little inventory. Without tracking the COGS, you might order way too much and you're wasting money on storage and holding cost, or not enough and then you're losing sales and you're out of stock.

19:52 Karlie

If the COGS aren't right and it's not organized right, your financial reports could be a total mess. And if your numbers are wrong and you really don't know if your business is doing well, then you have bad reports. It causes bad decisions and then big problems later.

20:11 Karlie

Oh, here's the big one. You might have to pay more taxes than you should. If you don't track your COGS correctly, the government might think you made more profit than you actually did, and then you're going to pay more taxes than you really need to.

20:29 Karlie

Back to that bad decision. You could be making bad decisions without knowing how much you're actually making. You're investing in wrong decisions over and over and causing your profitability to change.

20:43 Karlie

Another one we don't think about a lot is your suppliers might overcharge you. If you're not tracking your costs, you might not notice when a supplier increases your costs, or that you're not getting a very good deal. And then you end up paying more than you should have, or stopped and changed vendors, because you weren't paying attention to your cost and even understanding the cost.

21:01 Karlie

But what it really comes down to when COGS goes wrong, you could go broke and you could go out of business. Because if you don't know your real costs and you keep making those same money mistake decisions over and over, it could cause you to go broke and shut down.

21:19 Karlie

And so, we're going to do a poll now and just see what problems you're having with COGS. What are the top problems you guys are having and experiencing with that? Or maybe you don't even know, but if you're new to this and you're not really sure, as you look through that list, what is the biggest one you feel like would be the biggest problem? Incorrect pricing, or maybe the financials are messy? Which ones have you experienced?

So we'll give you a minute to look through those, and then Kelley will give us the results again too, and we can look at that. Before we move on to the next slide, which is Tamara, who's going to tell us what happens when COGS goes right.

22:02 Brittany Brown

So one of the things I want to point out while you guys are submitting your answers is just how important visibility is. This story that Karlie just told about clients who were selling their top sellers, they were actually selling at a loss. This actually happens a lot. It happens a lot to our clients, and it's because they don't have good visibility into what their costs are. So when they have big sales in order to try and drive up the opportunity of their business, it actually happens all the time. They don't have good visibility and they end up putting themselves in a loss position.

22:39 Brittany Brown

So it looks like one of the biggest issues you guys have is messy financial reports. Yep, that's a very common problem. Wondering if you're making money or losing it. This is such a key thing. I just talked about visibility, and visibility is so important. But if you feel like you're kind of operating blind, you are not alone.

23:04 Brittany Brown

I invite you to give us a call, because this is one of the problems that we help solve for, and that Finale and A2X help solve for as well. But this problem, wondering if you're making money or losing it, the anxiety that causes and the stress that that causes, really just not knowing where you stand, and therefore what decisions you could be making, what decisions you should be making, when you just don't have the visibility that you need.

23:20 Brittany Brown

So let's turn the time over to Tamara to talk about why it matters to do COGS right.

23:27 Tamara

Thank you so much, Brittany. And it's so funny, because I feel like this conversation can literally just follow from slide to slide, because there are so many correlations. Karlie gave an excellent overview of when COGS goes wrong, but a lot of those anecdotes really tie into why it matters to do COGS right to begin with.

23:53 Tamara

The bottom line is, if you're working with inventory, COGS really matters for so many reasons. And at the top of that list, really picks up from what Brittany was just mentioning a moment ago. You want to show that you're actually making money.

Many businesses think that they're making money. And Karlie gave an excellent anecdote about a business that did think they were making money for one of their top sellers, only to realize that they were actually losing money. So some businesses fall into that category. Some fall into the category of breaking even, and that's because they haven't calculated their COGS correctly. So it matters because you want to make sure that you're directly aligned with showing your profitability.

24:44 Tamara

It matters because you want to make sure that you can keep your cash flow healthy. If you're not accurately tracking your COGS, then pricing really becomes guesswork. And properly tracking your COGS is really a framework even for your pricing, because it helps you determine what is my profit margin, and you don't want that to be a mystery. And that cash flow, we want to make sure that's not going to turn into some sort of a roller coaster.

25:09 Tamara

I think both Brittany and Karlie touched on how it can affect your taxes, because in many instances when you're running an ecommerce business, especially when it's successful, you have a lot of transactions that are taking place at any given time, and then all of a sudden tax season hits and you realize you owe more than you expected, and it's like, hey, what's going on? So it really matters because you want to make sure that you're tracking COGS accurately, so that when it is time for tax season, you're not holding your breath waiting on, what's my liability? What do I have to pay?

25:52 Tamara

It matters because you want to make sure that you can plan for growth. And when you're properly managing your COGS, you're not just tracking your expenses, but you're also ensuring that your business really has a clear, scalable path to long-term profitability. Again, going back to the story, if you're not certain if a top seller is even making you money, how do you then have a pathway to long-term profitability? So you definitely want to make sure that you're properly tracking even for growth.

26:23 Tamara

Helping you set the right price for your products. As I mentioned before, what you're hearing is that we're kind of regurgitating a lot of the same key points, because this is how much it actually matters. If your COGS isn't locked in, again, you're selling at a loss. And so that pricing accuracy is something that really does tie into it.

26:47 Tamara

One of the things I don't think we touched on yet is that it matters because you want to be able to make it easy to get a loan. If your COGS isn't being tracked properly and your books are all over the place, and I think I just saw from the last poll, messy financials or reports, it's really about building a profitable, sustainable business. And that's actually going to start with well-tracked financials. And so we want to make sure that that data is accurate so that it does make it easy to get a loan.

27:20 Tamara

And last but not least, it really just helps you make better business decisions. I think everything that we're touching on really funnels up into, how can I make better business decisions? What tools allow me to make better business decisions?

And when you're properly tracking COGS the right way, it really becomes a foundation for strategic business decisions. Because whether you're deciding how you're going to price your products, or when to restock, or if you can afford to run a discount promotion on a product, your COGS data is really going to be the framework for giving you that clarity.

27:58 Timing and costing methods

Tamara

Okay. And now that we understand why COGS is so critical, if we can go to the next slide, let's really look at how to actually calculate and recognise it. And there's a lot to take away from this particular slide itself.

At a high level, one of the takeaways here is just to understand that COGS isn't just a single number. I think you saw from the equation that Brittany introduced to everyone a little bit earlier, it's really a puzzle made up of key pieces, and when they fit together nicely, it's very simple for you to be able to recognise or properly track those COGS.

28:38 Tamara

So we'll start with those product costs. What goes into COGS? Again, we're not just factoring in what is that per unit cost for that product. We're looking at, as Brittany mentioned earlier, your landed cost. Shipping, storage, what no one wants to hear about, tariffs, duties, ocean freight, air freight. All of those additional landed costs really are factored into that product so that you can ensure that your margins are exactly what you're expecting them to be.

29:09 Tamara

Quantity is another one. COGS is actually calculated based on how many units were sold, not just how many units were purchased. So accurately tracking that quantity of inventory that you have left really helps you determine, are my COGS accurate or not?

29:31 Tamara

Now, one of the key pieces that really causes a lot of conversation, sometimes even challenges, happens to be timing. I think we personally have questions about this on a daily basis. When should COGS be recognised? Some systems recognise it at the point of sale, while others, like Finale, we recognise COGS when the order ships. And the timing actually impacts your reporting and your tax calculations.

30:01 Tamara

If you're recognising COGS at the point of sale, that may align with your revenue recognition, and it matches COGS to the revenue at the point of sale. And that works for businesses that are fulfilling instantly.

But the second timing would be recognising COGS when that order is shipped. That's more accurate for physical goods. It ensures that that inventory is actually removed from the stock when it leaves the warehouse.

30:32 Tamara

Now, if you are not recognising COGS when an order is shipped, you can run into a situation of premature recognition. Because if an order is cancelled before shipping, then COGS can be mistakenly recorded. And for ecommerce and inventory-heavy businesses, recognising COGS when an order ships is often more precise, because it actually reflects that stock movement and prevents recognising costs for unshipped or cancelled orders.

31:04 Tamara

Now, sometimes there's that slight delay in recognition, because the revenue might be recorded at the sale while COGS is recorded at the shipment, and that could create short-term timing differences. And I'm actually going to bring Karlie in to talk about how that can be handled, since that happens to be a question that comes up often. So Karlie, you want to give a little colour to that?

31:23 Karlie

Yeah, and this has come up quite a bit with clients lately. It's interesting how things come and go, but we've had this come up a lot lately.

And like Tamara said, it kind of depends on their sales. We want to recognise COGS when revenue is recognised. So then you have to talk to our clients and say, do you have a lot of pre-sales? Are they doing a lot of pre-sales? And if they are, are they recognising that pre-sale, or are they deferring that revenue? So there's got to be a decision there.

31:45 Karlie

And then their fulfilment with their sales. Are they selling a product that takes months to be delivered? There are companies like that, where it takes a couple months. And if that's the case, when are they recognising the revenue, and do they want to match the COGS to it?

32:04 Karlie

And if they decide, I am going to recognise revenue right when I recognise the pre-sale or the sale, so I'm going to go ahead and recognise the COGS. Well, we know when COGS is booked, what happens to inventory? Inventory goes down. So now, even though that inventory is still in your warehouse and you haven't shipped it, you recognise the COGS, and what's happened to your balance sheet? Now your inventory is understated.

32:29 Karlie

So it brings up a lot of questions with clients, and just having them determine what they want to see in their financials, how they're recognising things. If there's not much of a timing difference, like Tamara said, recognising COGS when they ship will keep your inventory value more true. But if you really want to recognise it against your revenue and have a really good strong P&L. So we just talk to clients and try to figure out what works best for them in their business, and make sure they understand the process they've chosen, what methodology they're using.

32:55 Tamara

Thanks so much for that, Karlie. And that's the reason why we always recommend LedgerGurus, because they can definitely help you all determine which recognition is right.

And if we can go back two more screens, because there was one other puzzle piece that we didn't touch on. Thank you so much. And that was actually the costing method.

33:18 Tamara

Because this is very key, and I want to make sure that we did at least touch on that. Because again, this happens to be one of those areas where there's always a question in regards to, what valuation method are you all recognising, or what are you using?

And the common ones that we generally hear are FIFO, first in first out, LIFO, last in first out, and weighted average. And each one can actually impact your profitability and even your tax burden differently.

33:53 Tamara

So just at a high level, wanted to touch on that a bit. Starting with first in first out. And I'll use the same example for all three so that we'll understand what the difference is. This is just recognising your oldest inventory costs first, meaning that newer inventory costs are going to remain on your books.

So an example would be, if you're an ecommerce business and you are selling t-shirts, and you paid five bucks for your t-shirts last month, seven bucks for your t-shirts this month, FIFO is going to assume that you're selling the $5 ones first.

34:24 Tamara

If it's last in first out, then the newest inventory costs are going to be first, meaning the older inventory is going to remain on the books. So again, using that same example, if you sell the $7 t-shirts first instead of the $5 ones, actually your reported profits are going to be lower. That also reduces your taxable income. And so that's something that businesses sometimes do.

34:49 Tamara

Now, the last one is the weighted average, which actually smooths out your cost fluctuations. That happens to be the valuation method that Finale supports within our system itself.

And then using that same example, if you have 100 t-shirts, and half of those shirts you spent five bucks, the other half you spent seven bucks, then what's happening is the system is going to calculate the cost per unit, which means that the stated cost per unit across all hundred of those shirts is actually $6. So this really helps to keep your pricing simple, and it averages out all of your inventory cost to create a single cost per unit.

35:23 Tamara

So as you can see, there's definitely a different impact. And because of that, we know that there are so many moving parts, and it's easy for COGS to be manually calculated in a way that can lead to some costly mistakes. Zach's going to actually dive into some of those common mistakes.

But again, real quick, Karlie, can you give a little colour? Because with those different valuation methods, I do know that sometimes there is that different impact that you can have on your financials, before Zach dives into the problems with calculating COGS manually.

36:05 Karlie

Yeah. And I'm with you, Tamara. We tend to lean towards the weighted average, just because a lot of clients coming to us are trying to do it manually and calculate their own cost and manage it, and trying to remember the first in first out. And the FIFO and LIFO really depends on your industry and what you're selling. The average really works for most ecommerce businesses, where they're not tracking it by a batch.

36:28 Karlie

We could go on and on about this. In fact, Brittany, do you have anything to say as far as FIFO or LIFO? I know we usually tend to use the weighted average just because of the industries that we work with, and it evens it out, like Tamara said.

36:41 Brittany Brown

Yeah, and I would agree with you. It is easier to track in a spreadsheet. Trying to keep track of not only the product SKU itself, but which tranche we're in, and what the SKUs are for this tranche versus this tranche. If you have any hope of doing FIFO or LIFO at all, you must be in an inventory tool. It is virtually impossible to do that in a spreadsheet.

37:08 Brittany Brown

But I just also want to make it clear that every single one of these costing methods are completely approved by GAAP. So it doesn't really matter which method you choose. What really matters is whether you're consistent in the approach you take. There are pros and cons, frankly, to every single one of these. And a good tool helps to mitigate some of the pros and cons of those. So there's not even a preference, and this one's better. Each of them has their own set of limitations and their own set of hassles. But they're all considered completely legitimate costing approaches.

37:41 Tools: A2X and Finale

Brittany Brown

So, Zach, we'd love to hear from you on what you feel like the challenges are of the manual processes, as we talk about how FIFO and LIFO are basically out if you're trying to do manual processes.

37:52 Zach

Yeah, thanks Brittany. And I will say, I love spreadsheets. Spreadsheets are my happy place. COGS is not the place for that, though.

And we've got a lot of stuff listed here. For me, all of these stem from really three things, and that's going to be human error, the sheer volume of data that goes into tracking COGS, as well as the timing of when you're receiving all of that data to properly track those COGS.

38:24 Zach

We heard Brittany and Tamara both talk about all the different things that are going into really getting that true landed cost to track your COGS properly. We've got shipping, tariffs, your actual product costs. All of those go in.

And the one thing that we didn't talk about, there are all those things, but they're coming in at different times and from different people. The invoice coming from our manufacturer, from our shipping company, from customs, those are all hitting us from different places, coming at different times, maybe going to different people. It's a lot to consolidate and get put into the right place.

39:06 Zach

When you're doing these manual practices, it's really easy for certain invoices that are contributing to those costs to get missed and not get input into the spreadsheet. And it really leads to a lot of back and forth trying to make sure that all those things come together correctly.

39:26 Zach

Prior to Finale, my background was doing inventory and logistics management for sellers. And in those companies that tried to do this manually, I can't tell you how many days I spent that first week of the year just going back and forth on reports with my accounting department, on things that when you're using a system that gives you those processes can be done for you.

39:56 Zach

So it's a lot of data that you're just trying to keep track of, and get that timing correct. Do we have these shipments attached to the right purchase orders? Do we have these shipping costs attached to the right purchase orders? Do we have these tariffs attached to the right purchase orders and the right products on those purchase orders?

40:08 Zach

Are we getting that timing in correctly, so that maybe those changes in COGS, or shifting manufacturing costs, or as we're all kind of experiencing now, shifting tariffs, are those getting applied in the right time and place so that we're seeing those COGS accurately as the sales go out?

40:38 Zach

And dealing with back orders. Are we accurately tracking what was actually received versus what was in the purchase order? These are all huge data points that are easy to miss, easy to overlook, and take a lot of time when you're trying to do these with manual processes.

40:58 Zach

With that, Finale and A2X are of course both great options. I'm going to pass this over to Geoff to go ahead and talk about how A2X helps calculate costs.

41:09 Geoff Gualano

Thanks, Zach. I love this webinar. I've got Brittany talking about algebra calculations, Zach talking about how much you love spreadsheets, weighted average. I feel like my brain is too small to be here with all of you.

41:23 Geoff Gualano

But as Karlie and Brittany have mentioned time and time again, and this is incredibly important, connecting with an accounting professional that can recommend the appropriate tooling and the appropriate method for you is the most important thing. Because we're going to talk about A2X and we're going to talk about Finale, but digging into which one is actually right for your business, your industry, and your circumstance, trust the experts.

42:00 Geoff Gualano

I'm a very honest person, and I will honestly tell you that A2X is pretty badass when it comes to payout reconciliation. I said we won awards and I gave you the proof points, so it was legit. But we are arguably the most accurate solution on the market, the most scalable solution on the market. So whether you're doing a few thousand orders a month to tens to hundreds of thousands of orders a month, A2X will scale with your business, your level of complexity, whether you're in single country, multi-country, multiple currencies, and so on and so forth. So we do that really, really well.

42:38 Geoff Gualano

But in terms of COGS, I would consider A2X to be a lightweight solution. The way that you manage your inventory and the way that you do inventory accounting, I would argue that it's on a spectrum. And again, this is where an accounting professional will tell you where you are and what is the right tooling for you to track your COGS.

42:56 Geoff Gualano

So when I say A2X is a lightweight solution to track COGS, this is how we do it. If you have a rough idea, or at least a spreadsheet with all of your COGS tracked in, all you have to do is upload those COGS manually into A2X. You can manually put them into A2X, or you can link A2X up with that spreadsheet. A2X also will sync with Shopify and pull in your cost from Shopify. And then at time of payout, that is when we will calculate the COGS and post it as well.

43:28 Geoff Gualano

And that's what A2X does. It's a super simple solution. So if that spreadsheet that you have is continually updated, we'll pull in the data and make sure that we're posting the appropriate COGS. Or you can do it manually within A2X.

43:39 Geoff Gualano

So a lot of people, when they just start on their inventory accounting journey and their COGS journey, they'll use A2X as that kind of first step, because it's simple, it's useful, and it speaks to one thing that Brittany said that I think is tremendously important, is that it allows people to go from a manual inconsistent process to a consistent process. Whether it's lightweight or not, and whether it tracks all of these different components or not, it doesn't really matter. It's consistent.

44:11 Geoff Gualano

And that's kind of how I would think about starting with A2X on the COGS side. So if you're using it for payout reconciliation, you could be a very mature nine figure business, that's totally cool. But on the COGS side, you tend to be a little bit earlier on your journey of inventory accounting.

Brittany, would you think that's a relatively fair statement?

44:29 Brittany Brown

Yeah, I do actually. And I think you did a beautiful job of explaining the place that A2X sits in as far as the inventory world goes.

It is never going to be a replacement to a full IMS, in large part because it is a static costing system as opposed to a dynamic costing system, whereas an IMS moves you into a dynamic costing system.

44:53 Brittany Brown

But as anyone on this call knows, who's ever tried to operate an IMS, you have to be prepared for the level of maturity that is going to be required of you. And a lot of new small businesses, they're just not ready for that. But costing based on a cash approach is really underserving yourself, because it skews your financial picture so much.

45:13 Brittany Brown

So how do you step into good costing without tackling a full IMS? A2X does a beautiful job of creating an entry point for that, that handles a lot of the pain of it without requiring you to be prepared for the full maturity of an IMS, as you're getting ready to be prepared for the full maturity of an IMS.

45:36 Geoff Gualano

Bingo. And we do try to make the process as automated as possible. Like the initial COGS functionality, the way that you used it, you had to manually input your COGS. Then we transitioned to the ability to pull the data from a spreadsheet. And then we introduced the Shopify cost sync.

45:54 Geoff Gualano

And I don't want to tease kind of the three or four slides coming up, but we're also introducing an integration with Finale once you are ready to level up and to get into a more mature inventory accounting system.

46:07 Geoff Gualano

But again, the most important piece, I'm going to end with this. Regardless of the tooling that is available, just talk to somebody who knows what they're talking about, to help you identify what is the right method, what is the right tech stack, and when you should be ready to either make a transition into A2X or potentially a fully fledged inventory management solution.

46:30 Brittany Brown

Yeah. So Zach's going to take us into what that transition will look like for more robust functionality, and what's involved in that.

46:37 Zach

Awesome. Thanks, Brittany. Thanks, Geoff. And I couldn't agree more with Geoff. Utilising companies like LedgerGurus, they're really going to steer you in the right direction here.

But if they're steering you for that next level up, the way that Finale is going to calculate these COGS and take you to the next level is by really giving you that more dynamic, full featured way of looking at your cost of goods.

47:05 Zach

One thing I think Tamara mentioned previously is Finale is going to use the weighted average version of costing. And we are going to use your landed cost for that weighted average.

What that means is, on your PO, you're going to have the ability to add in your shipping, your tariffs, all of these things that we've been talking about throughout the entire webinar, into that purchase order, and have them get allocated out into the cost of those products.

47:40 Zach

One of the great things with Finale is that we can give you some options on how you allocate those out as well. So whether you're allocating those costs out by cost that you're paying to your supplier, by the weight, by the volume, there are lots of options there for you to figure out what works for your business, or partner with Brittany and her team to figure out what works best for your business.

48:07 Zach

And that might be different depending on the specific charge as well. It may be common to see shipping split out by volume, whereas something like tariffs might be split out by your subtotal of that product. And so we really give you a lot of control there in how you're building out that landed cost. And you may have costs associated with that PO that you don't want allocated into landed cost. You can have those options as well.

48:38 Zach

The next piece of this is when we calculate that new costing and add it into the average. We're going to do that upon receiving the purchase order. So while that order is, if you're ordering from overseas or even down the street, while that order is in production, on the water, in transit to you, it's not going to have an effect on that weighted average until you actually receive that into your warehouse. At that point it will get averaged in.

49:10 Zach

And similarly, when we recognise the actual COGS, as Tamara mentioned earlier, we're going to do that upon shipment. Since Finale is that full featured IMS, we have that insight into both when the order was sold and when the order was shipped, which allows us to give you that COGS recognition at time of shipment, which as stated earlier may or may not be the right move for your business.

49:33 Zach

And if we could go to the next slide. We'll get into a little bit more of the deeper functionality here.

So we talked about the purchase cost tracking. We're going to give you the ability to add in all of those additional fees, charges that may go in there, and give you that look at your real time inventory valuation. So as soon as you have those adjustments to your costs, again, we're using that weighted average cost, so that's going to filter down to all of your inventory, give you that nice simple real-time look at your valuation.

50:03 Zach

The next big thing is going to be for any clients that may be using bill of materials or kits or bundles. One of the things that we see commonly is, even if you might have a great view of what is my cost of goods, what is my margin on all of these individual components, once you bundle those together and start changing the pricing, a lot of times you're losing that visibility.

50:34 Zach

And so while you may be profitable on each of those components when sold individually, the discounts or things like that that you may be giving on bundles may change that picture for you a little bit. So having that detailed look at, if I were to build this kit or sell this bundle at this current point of time, what are my costs going to be to do that? Having a system like Finale is going to give you the insight into that.

51:04 Zach

We talked about COGS at time of shipping, I won't harp on that again too much. But I do want to just say that's really big if you're a company that has a lot going on with deferred revenue, with pre-sales. That can be really huge for keeping your COGS in line.

Going back to my previous experience as a seller, we did everything on pre-sales. And so I'd be maybe shipping out stuff at one average cost today, while I'm selling stuff that's not going to be going out for another three months that has a totally different set of costing. So that can be really helpful for those situations.

51:51 Zach

And I did want to get into a few of the more detailed things, as we start getting into how is this all going to look in your general ledger? How do we separate this out?

So we're talking a lot about simplifying what are the COGS for my whole business. But if you're looking to separate those out further on your P&L and your GL, Finale is going to give you that ability to separate those COGS out by things like sales source. Or if you have different product lines that you want going to different COGS accounts, you can set that at the product level.

52:29 Zach

So it not only gives you the ability to track that accurately, but gives you the ability to really dive deep into how different sections of your business are doing, and how the COGS are affecting those different sections of business.

52:41 Zach

Lastly, I want to talk a little bit about how we can get those COGS into a system like QuickBooks Online. We of course have the ability to submit costs for each individual sales transaction one at a time. For a lot of ecommerce businesses though, you don't need to see those as individual transactions. So we also give you the ability to consolidate those COGS on either a daily or monthly basis, to really simplify that tracking within QuickBooks.

53:12 Zach

And then I am going to pass it back over to Geoff, who's going to talk a little bit about bringing it home and integrating everything together.

53:24 Geoff Gualano

Introducing the A2X and Finale integration. No, I'm kidding.

What I think is so funny, and I love it, so not everyone here will know who Chris Hondl is, but Chris Hondl is the chief technology officer for Finale. And I was asking him, describe why somebody would pick Finale over any other inventory management solution.

53:51 Geoff Gualano

And Tamara and Zach, you might not like this, but Chris, he's the CTO, so in the weeds, super nerdy guy. He's like, Finale is an unbelievable solution for people that love to nerd out about inventory and really get into the nitty gritty. It's full powered inventory madness. Which is, based on everything that you're describing, it's awesome. If you really want a very robust amazing solution, this is definitely for you.

54:24 Geoff Gualano

So let's talk about the A2X and Finale integration and how to think about that with that context.

So if Finale is kind of the finish line and A2X is the entry point, A2X is a lightweight solution, how do these two things come together? And it's actually quite simple.

54:42 Geoff Gualano

So if you're currently using A2X for your payout reconciliation and for your COGS, I talked about the different methods in which you can get your cost into A2X. Mainly put it in, you can connect it with a spreadsheet, you can sync it with Shopify.

Let's say you start using an inventory management solution and now your costs are in Finale. Well, with this integration, you could actually continue to have A2X post your COGS, but you're pulling the cost from Finale.

55:07 Geoff Gualano

Eventually you can move into a world where you get into the deep advanced COGS workflows. But I think of it as kind of like this awesome transitionary period, because like I said earlier, inventory is a spectrum. You start here on the journey and you end here. And this just helps smooth out that phase of evolution, and the journey from going from a lightweight solution with A2X to a more robust solution with a fully integrated inventory management solution like Finale.

55:39 Geoff Gualano

So this is what the integration does. It's super simple. What you're seeing here is you're just establishing a connection between A2X and Finale, and then A2X is going in and pulling in the cost, and then A2X posts your COGS on a going forward basis.

55:52 Geoff Gualano

Now the really cool thing is, eventually you can transition to just have Finale doing all of your COGS, and you can turn off this integration. And then on a going forward basis, A2X and Finale will work in parallel with one another. So A2X will reconcile your payouts and Finale will do your COGS. Then you can turn off income posting from Finale, so you're making sure that you're not duplicating data in your accounting software.

56:18 Geoff Gualano

These solutions work wonderfully well together. And I think this integration is just an awesome step to transition.

Brittany, and Karlie, I'd love to hear your thoughts on the way that I just described why we went about building this integration with Finale.

56:42 Karlie

Well, one of the things I wanted, oh, sorry. I just wanted to mention, most clients, all clients that we put on Finale, or that use Finale, also use A2X for their revenue recognition and reconciling, because Finale does not do well at that. Although Finale is phenomenal at inventory and all of that, they do not, like Geoff says, A2X is the one there.

56:59 Karlie

So they're already going to be using A2X for the revenue, and they might want to be using more. Or they're already using A2X when they come to us and go to Finale, and they're using it for cost.

So it is kind of a nice easy flow. Okay, we're still going to use A2X and we'll just change methodology slowly. So we're not going from boom to this big change. And so I like that, Geoff. I like the thought of it being kind of a smooth transition, where they're probably using A2X anyways as we're moving them into the tool. Sorry, Brittany.

57:30 Brittany Brown

Well, and I remember the first time that Geoff ever told me that he was thinking about integrating with Finale. And at the time, I remember thinking, why would somebody be pulling cost into A2X if they had an IMS tool? I actually didn't see the vision of it. And he said to me, aren't you concerned about the timing issue?

57:55 Brittany Brown

And this is where I think this solution really solves for problems. And to give you guys a quick background on timing, because we want to make sure we have a couple minutes for Q&A, is that an inventory tool is going to provide cost at the time of shipment, whereas a revenue recognition tool like A2X recognises revenue at the time of the sale. And so you're going to have a discrepancy there. And depending on how much you're selling and how long the delay between that shipment date and that sale date, then it might create material issues in your financials.

58:21 Brittany Brown

And so by having a tool like Finale basically track all the COGS and manage the inventory and the quantities and all the things that are going on, but then having it pull itself into A2X, which then matches those two things together, now you're getting the workflow functionalities of a full IMS, and you're getting the huge benefit of having a tool like A2X that reconciles all the payments. But now you're also getting a matching between the cost side and the revenue side of the period. So I would say that's the primary benefit that's solved by this sync that's happening right now.

58:55 Questions

Brittany Brown

All right. So we're going to jump into the Q&A, because we just have a couple minutes and I did commit to answering questions at the beginning of this.

So the first one I just want to touch on really quick. I just want to add a little colour to Joey's question, which was to say that he notices a whole lot of fluctuation and large posting differences when he's selling on Amazon, and his clients do not like these inconsistencies.

59:24 Brittany Brown

Last webinar that we did, Joey, I had Tamara go into a lot of detail about their deep integration with Amazon, and how an understanding of what's really happening on Amazon actually smooths out some of those inconsistencies.

Because you've heard me say it before, I'll say it a thousand times before I die, selling on Amazon is like being in an abusive relationship, and they have the worst 3PL in the entire world. And the visibility you have into what's actually on hand and what's actually happening is so problematic that if you're just tying out to what Amazon says, well, today they had it, yesterday they lost it, tomorrow they're going to find it again.

59:59 Brittany Brown

And if you're basically tying out to Amazon constantly, the inconsistencies you're going to get are literally inescapable. So by having a better integration with what's really happening, which Finale does actually provide, you are going to get some smoothing out on that. But the unfortunate reality is that when you are using a 3PL, you lose visibility into what's actually on hand. And Amazon is literally the worst 3PL in the entire world. So there's that.

1:00:26 Brittany Brown

Okay. Then let's go real quick to the question, how does A2X input loss or other written off inventory into QBO?

Now, I'm going to answer this quickly just for the sake of time, but please correct me if I'm wrong. So because A2X is not a full IMS, guys, it is what we said, something that tracks costs and allows you to post based on the quantity of what's sold. It is not looking at things like written off inventory. That's something you're going to be posting individually.

1:00:58 Brittany Brown

It's going to be making a calculation that says, what was this inventory valued at? How many did we see sell? What should that calculation be? It's going to make a journal entry to go from inventory to cost of goods sold. A tool like a Finale is going to be a lot better for tracking things like losses and write offs and all that other kind of stuff.

Geoff looks, thumbs up, says you would agree with that. Okay.

1:01:17 Brittany Brown

The next one, how to use the month end inventory valuation provided by A2X to reconcile things like Amazon inventory ledger, QBO inventory COGS, which should match the payouts in A2X.

So I'm again going to take a first tackle at this and then have you guys add colour where needed.

1:01:35 Brittany Brown

So think back to that equation, the piece that the ending inventory valuation plays. So when you are trying to basically true up your inventory, looking at what you actually have at the end of the month and valuing what that should be, allows you to actually back into what cost of goods sold should be for the month.

1:01:54 Brittany Brown

So if you're going to do a monthly tie out to an ending inventory valuation, which is a great practice by the way, basically you're going to plug cost of goods sold against that monthly inventory valuation. And as long as you are correctly reflecting inventory purchases that came in, and you started with a good beginning balance, that ending inventory valuation is going to provide you the one remaining unknown variable, which is that cost of goods sold.

1:02:22 Brittany Brown

So whether you are doing this in QuickBooks Online and you're going to tie that all out, or how you're managing or tracking that, that is a very valuable thing to have, that ending inventory valuation. And it operates the same way. They're going to say, this is what we can see that you have on hand, this is what you told us the inventory is worth, therefore this is what the ending inventory valuation is. Therefore, tying your financials to that number will give you a more accurate cost of goods sold number.

Anything you want to add to that, Geoff or Tamara or anybody?

1:02:53 Karlie

I have a question for Geoff. Does A2X provide an inventory valuation? It says, how do you use the month-end inventory valuation provided by A2X? Does A2X provide that? I've never seen that in A2X.

1:03:08 Geoff Gualano

A2X, a month end valuation.

1:03:15 Brittany Brown

I do think though it does provide a report that shows what inventory is showing as on hand for Amazon. I may remember that incorrectly, Geoff, I might be totally off about that.

1:03:27 Geoff Gualano

Let me, in the follow-up email, I will send support documentation on this specifically.

1:03:31 Karlie

Okay. Yeah, thank you.

1:03:33 Brittany Brown

Okay, cool. And I think it was specifically an Amazon thing, that it had the ability to pull in and look at reports that said, what does Amazon say we have on hand at month end? Which you can then use to do an inventory valuation, if I remember correctly.

1:03:44 Brittany Brown

Okay. For Amazon FBA sellers, if you use Finale to input the COGS into QBO without A2X, how does Finale know to only input the COGS from the payout and not COGS of actual sales, which is different because of deferred transactions retained by Amazon?

Finale, do you guys want to take a stab at this, or do you want me to jump in on this one too?

1:04:09 Tamara

You want to go ahead and take it? You want to go for it, Zach, or do you want to just defer to Brittany?

1:04:15 Zach

Yeah, go for it, Brittany, because I think that we generally defer to you all on that one.

1:04:21 Brittany Brown

Okay. So the question is, if you're using Finale to basically post cost of goods sold, how does Finale know to only input the COGS from the payout?

So this is actually talking about the timing difference here. So basically Finale is going to post COGS for sales that have been shipped. It is not making decisions based on this one has paid out and this one hasn't paid out.

1:04:54 Brittany Brown

The decision point that Finale and any other inventory tool is making, and it is the more right financial approach in general, we recognise revenue and COGS at the time that the order is fulfilled, which means shipped. So that is when it posts COGS.

You're going to post COGS directly to QuickBooks Online from an IMS. You are going to be posting based on the shipment dates. That's how these systems are basically designed to post.

Does anyone want to add anything to that?

1:05:28 Tamara

Nope, it's accurate.

1:05:34 Brittany Brown

Okay. And from our friend Scott Scharf, A2X provides one of the most accurate month end Amazon FBA quantities. I knew it. I knew it.

1:05:41 Geoff Gualano

I added the support article in the chat as well, which provides detailed instructions to use it.

1:05:47 Brittany Brown

Okay. I was like, I know we're not imagining this. Geoff and I are not up on the intricate details of all this. I was like, I know.

1:05:55 Geoff Gualano

So, Geoff, here's the problem.

1:05:57 Karlie

Karlie's right, hard to find.

1:06:00 Geoff Gualano

So, put my marketing hat on and figure out how do I get that more front and centre.

1:06:06 Karlie

Yeah. And to Scott's point, it's only for Amazon FBA, which most companies don't sell on just Amazon, I mean, they probably do have separate channels, totally different consideration, but yeah, only Amazon FBA. Okay, this is good to know. I'm going to read the article.

1:06:24 Brittany Brown

Great. Much love to Scott Scharf, who Geoff and I are both big fans of. Scott, he's a good friend of ours for years and years and years.

So yes, we are not crazy. There is a really good valuation report provided by A2X for Amazon FBA quantities on hand at year end or period end or whatever. And because you have also said this is the value that inventory should be, then it also provides an ending inventory valuation, which can then be used to clean up your COGS for the month and give you better visibility into what's actually happening.

1:06:57 Brittany Brown

All right, I think we got all of our questions answered. Looks like, as I'm scrolling through here, we don't have anything else. So let's go to the next slide just to do a quick recap.

1:07:03 Brittany Brown

I want to thank our guests today, our partners. I love both of these partners. You guys, I have built an entire practice around these two tools and these two partners. I could go on all day about why I love them both so much, why they're so integral. They both solve the problems of their space very, very well. They both support their customers very well. They both have great support. They both support their partners very well. They are wonderful to work with. They know their stuff. They are sharp. They are competent. They are responsive. They're just great. I cannot say enough good about these guys.

1:07:42 Brittany Brown

So if you're looking for a tool that solves the problem of reconciling payments, A2X is your peeps. And if you're looking for an inventory tool that will help you streamline and mature your operations and give you great visibility into what's going on, and support you post implementation in a way that will allow you to stay successful on a tool, Finale is your people. And if you just need a really great accounting partner who can help you bring all these pieces together and create visibility into what's happening from a financial perspective, LedgerGurus is the way to go.

1:08:12 Brittany Brown

Thank you so much for coming to our webinar, you guys. Your engagement was wonderful, your presence was wonderful. Feel free to go back and watch those links, share those links, take notes, educate yourself, educate your friends, and thank you so much for participating.

And to our partners, all my love in every way, and thank you very much. And to the backend people who ran all of this, Kelley and Samantha, couldn't do without you guys. Really, really appreciate you.