Cost of Goods Sold (COGS)

Definition

Cost of Goods Sold (COGS) represents the direct costs attributable to producing or delivering the goods and services a business sells. It includes materials, direct labor, and any costs directly tied to production.

COGS by Business Type

• E-commerce/Retail: Product costs, shipping, packaging, payment processing fees.
• SaaS: Hosting infrastructure, third-party API costs, customer onboarding labor.
• Services: Direct labor (employee or contractor time spent on client deliverables).
• Construction: Materials, subcontractor costs, equipment rental for specific jobs.

Why It Matters

COGS determines your gross margin — the most fundamental indicator of whether your business model works. If COGS is too high relative to revenue, no amount of efficiency elsewhere will save you. If COGS is increasing as a percentage of revenue, your unit economics are deteriorating.

How CentSight Helps

CentSight tracks COGS from your QuickBooks data and monitors it as a percentage of revenue over time. It flags COGS increases early — a vendor raising material costs by 5%, hosting costs creeping up as usage grows, or freelancer rates drifting above budget.