One of the most common gaps we see in online sellers’ books is inventory and cost of goods sold that doesn’t match what’s actually happening in the warehouse. Here’s why it happens and how to fix it.
Your accounting software isn’t your inventory system, necessarily
If you’re using a separate inventory or stock management platform connected to Xero or MYOB via an integration, the sync between the two needs to be checked periodically — integrations can silently drop transactions or double up on stock adjustments if they hit an error. Don’t assume the connection is working correctly just because it was set up once.
Cost of goods sold needs to move with your sales, not sit static
Cost of goods sold should be recognised against the period the sale happened in, not when you paid your supplier. If your COGS figure barely changes month to month regardless of sales volume, it’s a sign the coding isn’t actually tracking real stock movement.
Stocktakes still matter, even for a small operation
A periodic physical stocktake, even a rough one, is the only way to catch shrinkage, damaged stock or data entry errors before they distort your margins for months. Reconciling your accounting system’s stock-on-hand figure against an actual count once a quarter is worth the couple of hours it takes.
Know your real margin, not just your revenue
Revenue growing month on month means nothing if your cost of goods sold is growing faster because supplier prices have crept up or shipping costs have increased. Separating COGS clearly from general expenses is what lets you actually see this before it becomes a problem.
Making your numbers reflect reality
Getting inventory and COGS coded properly is one of the more technical parts of e-commerce bookkeeping, and it’s where we spend a lot of our time with online seller clients. Our e-commerce bookkeeping service keeps this reconciled properly every month. Get in touch if your margins don’t add up the way they should.