Keep The COGS of Your Business Running Smooth With This Game-Changing Tip!

Running a successful business is challenging, and one of the most important things any business owner should be familiar with is Cost of Goods Sold (COGS). 

Calculating COGS is essential since it helps businesses understand their expenses and profits, and it plays a crucial role in tax returns. 

As a business owner, you must be wondering how to calculate COGS and how to optimize tax returns. 

Let us at Orange Crush Business Consulting guide you through everything you need to know about COGS and an accountant’s role in maximizing your returns.

To understand why COGS is important, we first need to know what it represents. COGS includes all the costs directly related to producing or manufacturing the goods or services that a company sells. 

This includes the cost of any raw materials used for production, labor costs, shipping and handling, and any other costs directly attributable to the production of inventory. By calculating COGS, a business can determine how much it spent on goods or services, and how much of that was sold. This information is critical, as it helps to identify how much a company has earned and the amount of taxable income for the business.

COGS plays a significant role in determining a company’s taxable income. In the United States, excluding inventory purchases is not an option when filing taxes. Therefore, it’s crucial to have a detailed understanding of what is included in COGS. The COGS formula is simple: Beginning Inventory + Purchases – Ending Inventory = COGS. 

Keep track of your inventory carefully, regularly review your records, and make adjustments accordingly to get the most accurate calculations. A professional accountant can help ensure you’re on track throughout the year so that there are no discrepancies at tax time, maximizing your returns.

Now that we know COGS’s importance, let us discuss the benefits of using an accountant’s services. A professional accountant with expertise in tax preparation can guide a business owner regarding their taxes in all aspects, from calculating inventory valuation to identifying and maximizing credits and deductions. 

Engaging an experienced accountant can help a business owner identify deductions, accelerate asset depreciation, and improve their tax strategy. They keep the business’ taxes easily trackable and reduce the risk of costly errors or late payments.

An accountant can assist a business owner in optimizing their COGS, ensuring a company’s tax strategy is effective. They can advise on tax credits the business may be eligible for, including research and development (R&D) credits, which helps accelerate COGS deduction. An accountant’s expertise can help a company identify realistic goals for their business and create a strategic tax plan that maximizes their COGS and returns.

A proper understanding of COGS and its role in taxation is crucial to run a business effectively. Accurately calculating COGS and optimizing its value can save a company money and improve its bottom line. 

Engaging a professional accountant ensures easy recordkeeping throughout the year, reduces accounting errors, and better tax planning. With their professional guidance, business owners can understand the complexities of COGS, get maximum returns at tax time, and focus on running their businesses without worrying about taxes.

Don’t get squeezed by the COGS of business – the experts at Orange Crush Business Consulting can help!