How to Track Cost of Goods Simply
Dec 21, 2024
One of the most common pain points for resellers is figuring out profit margins. Without knowing exactly what each item cost you, it becomes guesswork to determine whether your business is sustainable. That’s why tracking Cost of Goods Sold (COGS) isn’t just an accounting exercise—it’s a way to run a smarter and more profitable resale operation.
Why Tracking Cost of Goods Matters
Tracking the cost of goods sold (COGS) is the foundation of financial visibility. It allows you to:
See net profit per sale, rather than guessing margins
Identify which products or categories are truly profitable
Budget new sourcing decisions with confidence
Prepare for taxes more accurately and with less headache
Without connecting purchase cost to each order, resellers risk underselling, overspending, and missing clear opportunities to scale.
Step 1: Record Cost per Item or Per Lot
Begin by jotting down what you paid for inventory the moment you acquire it. There are typically two types of purchases:
Lot purchases: You buy multiple items together (e.g., a box of vintage clothing for $100). To track accurately, divide $100 across however many pieces you intend to resell. For example, 20 pieces makes each one effectively $5 cost.
Individual purchases: Each item has its own receipt or purchase price. Simply record the exact paid cost.
Keeping this structured is important. If you buy lots often, build a simple rule—divide cost evenly, or apply weighted costing if some items clearly represent more value than others. What matters most is consistency.
Step 2: Link Purchase Cost to Sales Records
For sustainable bookkeeping, the cost must connect directly to sales. Assign each item a lot number or inventory identifier. Then, when you sell, reference that number in your sales system and include the associated cost. Doing this links cost with selling price seamlessly.
For example:
Purchase Record: Lot #451, Paid $200, 40 units → $5 cost per unit
Sales Record: eBay order of one shirt, Linked to Lot #451, $5 cost, sold for $24.99 → Profit: $19.99 (minus platform fees)
This single connection between buy cost and order record makes reporting easy, whether you use spreadsheets or specialized tools.
Step 3: Choose a Method for Centralized Tracking
Consistency beats complexity. You don’t need elaborate solutions; what matters is keeping everything in one central record. Options include:
Spreadsheets (Google Sheets / Excel): Flexible and free. Create columns for Lot/Item ID, Purchase Date, Supplier, Quantity, Unit Cost, Sale Price, Sale Date, Platform, Fees, Net Profit. This allows powerful filtering and pivot tables later.
Accountancy Software: Platforms like QuickBooks or Wave help with formal bookkeeping. These can track expenses and sales but often require manual linking of per-item costs.
Inventory-Focused Systems: Some resellers use simple databases geared toward stock monitoring. They work well but may lack sales integration without customization.
Reseller-Optimized Tools: Tools such as Gavelbase streamline this connection between purchase cost and item-level sales records, reducing manual entry by linking orders directly to buy costs. It’s highly efficient when scaling beyond a few dozen items.
Step 4: Automate Calculations Where Possible
Once your system is structured, automation saves time. Set formulas in spreadsheets to calculate profit margins automatically per item, factoring in platform fees. If you use software, configure it to show net profit per order after costs. The less thinking you have to do manually at each sale, the more consistent your tracking will be.
Step 5: Review and Adjust Regularly
At least once a month, review your records. Look for items that consistently deliver high margins, and compare them with items that deliver weaker or negative returns. This informs smarter sourcing strategies. You’ll also notice trends—such as certain categories being more profitable in certain seasons.
Tips for Keeping Tracking Simple
Standardize IDs: Always assign a lot or item code when logging purchases. It’s your anchor for linking costs to sales.
Keep Everything Digital: Paper receipts get lost. Snap a photo and attach it to your record.
Batch Entry: Set aside a fixed time weekly to update inventory and costs. Prevents backlog.
Start Basic, Then Improve: Even a simple spreadsheet is better than nothing. Evolve toward automation only as your business grows.
Common Mistakes to Avoid
Not splitting lot costs across items and therefore losing item-level profit visibility
Tracking sales but forgetting to link purchase cost
Overcomplicating systems and abandoning them because they are too time-intensive
Failing to account for selling fees in net profit
Final Thoughts
Tracking cost of goods doesn’t require a finance degree or expensive systems. The essential principle is simple—record what you paid, per item or per lot, connect that cost to the sale, and review results often. By combining a disciplined approach with a central record-keeping method, you will gain total visibility into profitability. Whether you stick with spreadsheets, adopt specialized tools like Gavelbase, or blend both, the important step is starting today. Once implemented, you’ll never have to guess about margins again—you’ll have clarity and confidence to grow smarter.