COGS when Inventory not tracked

Hi, many small businesses such as cafes do not track inventory. I cannot see how to simply set up to show COGS separate to Operating Expenses so you have Sales, less COGS (Opening Stock + Purchases, less Closing Stock) = Gross Profit, less Expenses = Net Profit, Where maybe Opening & Closing Stock can be entered as a journal entry whenever they do a stocktake ? Monitoring your Gross Profit Margin is very important and unless I (and my clients) can do that I cant see the value in recommending this program to them.(I am a Small Business Advisor).

To explain further, sales are simply recorded as a total cash sales for the day, and all stock purchases simply as Purchases.

Read though this topic - about half way down there is a model set up

In a cafe using inventory is impractical. Most of what you purchase are ingredients. You dont just buy in a tomato and sell it. You buy a bag of coffee beans and sell it in dozens of different coffees, same with milk, flavourings etc. It would be impossible and inaccurate to run an inventory system in these circumstances and not worth the time required to do so if it would work. So a simple Direct Costs account for Purchases so as you can monitor and measure Gross Profit is the easiest way to manage this in my view.

Below is the Non-Inventory setup if using Opening / Closing Stock
LHS Chart of Account set up - RHS Summary tab P&L Statement

If not using Opening / Closing stock - then a more basic model

The point is - you can designed the Chart of Accounts to do exactly as you want.
There are no limitations, boundarys or controls.

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Thank you, that looks good.

“The point is - you can designed the Chart of Accounts to do exactly as you want.There are no limitations, boundarys or controls.” And that is the way it should be, just a matter of knowing how to do it.

Go to Settings - Chart of Accounts and all the tools are there and read this Guide

I have set that up, except I cannot see how to get your Gross Profit & COGS totals ?

Got it for the COGS. Now for the Gross profit Sub-total.

Make Gross Profit a new group. Use the code field to control position and what contributes to each group:

I have that but clearly I am doing something wrong;

The Gross Profit should be a “New Total” as you want a calculation to occur.
Not a “New Group” as indicated above as that only provides a Heading

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Ah, yes. That’s what I get for providing an example from a test business created by someone else. I was thrown off by the fact that when you add a new total, it shows up on its editing screen as a Group. But unlike real groups, you can’t make it part of another group.

So, @tec, you need to delete the Gross Profit group (3) you created and replace it with a new total of the same name. Your chart of accounts will end up looking the same, but the calculation will be there.

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Got it now guys, beautiful…

You might want to change the total name to Gross Profit (Loss), since it will show in parentheses if it goes negative. Up to you.

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