How do I track cost of goods sold for e-commerce products?
COGS for e-commerce includes everything you spend to get products ready to sell. That means the purchase price from your supplier plus inbound shipping, packaging materials, and any customs or duties if you import. This total is called your landed cost, and it’s what matters for tracking profitability.
Most e-commerce sellers use accounting software like QuickBooks connected to their sales platforms. Shopify, Amazon, and Etsy can sync sales data into your books. But recording sales is only half the equation. You also need to track what each product costs and reduce inventory when items sell.
If you carry inventory, set up products as inventory items in your accounting software with accurate costs. When you receive a shipment, record the purchase and add to inventory. When you sell, COGS should pull from inventory automatically. This perpetual inventory method keeps your books accurate without manual adjustments every time something ships.
The challenge comes when costs fluctuate. Your supplier raises prices, shipping rates change, or you find a cheaper source. Update your item costs when this happens. Using outdated costs means your COGS is wrong and your margins look better or worse than reality.
For Amazon FBA sellers, keep FBA fees separate from COGS. The product and getting it to Amazon’s warehouse is COGS. The referral fees, fulfillment fees, and storage fees are selling expenses. Mixing these makes it impossible to know if a product is profitable before Amazon takes their cut.
Multi-channel selling adds complexity. If you sell the same product on Shopify, Amazon, and Etsy, you need consistent COGS regardless of channel. The margin might differ due to platform fees, but the underlying product cost stays the same.
Inventory management apps like A2X, Cin7, or DEAR Inventory can automate much of this. They pull sales from all your channels, calculate COGS using your item costs, and push accurate numbers into QuickBooks. An Andover, MA bookkeeping service familiar with e-commerce accounting can help set up these integrations correctly from the start.
The goal is knowing your true gross margin by product. If something costs $12 landed and sells for $30, your gross margin is $18 or 60%. If you’ve been recording cost as $8 because you forgot shipping and packaging, you think you’re making 73% when you’re actually at 60%. That difference matters when deciding which products to promote, discount, or discontinue.
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More Questions
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Record gross sales and platform fees separately, not just the net deposits. Use integration software to pull data from Amazon, Shopify, and other channels into QuickBooks, then reconcile each platform's payouts individually.
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Yes, professional training is available and often saves hours compared to piecing together free tutorials. A trainer can configure your chart of accounts correctly, teach you the features you'll actually use, and catch mistakes before they compound.
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Keep financial records, tax documents, employment files, business formation papers, contracts, and insurance policies. Most tax-related records should be kept for seven years, while formation documents and insurance policies should be kept permanently.
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