Add an option for calculating COGS at time of invoice

Currently the Cost of Goods Sold (COGS) value is recognised and posted to Xero only when the goods are Shipped from DEAR.


After analysis of orders and transactions from a number of our clients, we are noticing that many of our clients are invoicing for goods up-front - often 2-3 months in advance. Or they are in situations where a customer places a pre-order and is invoiced for part or all of the goods in advance.


The current way that COGS is calculated at the time of shipping is causing some misrepresentation across monthly sales.


eg. If a sofa (custom built) is ordered in January, invoiced in January and paid in full by the customer, but takes 8 weeks to manufacture and does not ship until March - currently the COGS are not being posted until March when the item ships.


Ideally for our clients in the above scenario we need the COGS to post at the time of invoice (January in above example) so there is a true stock value being posted to Xero for the corresponding calendar month.


4 people like this idea
  • Hi Christine 

    You can manage the date of the COGS transactions using Default Shipment Date parameter on general settings date.  If you select 'Invoice date' your COGS and sales transactions will have the same date.

    Also in accrual basis accounting revenue is earned and recognized upon product delivery or service completion, without regard to the timing of cash flow. So sending invoice 2-3 months prior the product/service delivery might be not what GAAP recommends to do. If you need to request a deposit from your customer you may consider using sales quotes instead of invoices. When you authorise sales quote no sales transactions are generated, but you can request and record customer pre-payment against the quote. When product is ready you will generate the invoice and complete shipment. This way your sales and cogs transactions will fall into the same period. 

Login or Signup to post a comment