Cost of Goods Sold (COGS)

Reducing Costs, Improving Margins with ASC COGS Solutions

ASC solutions help communications service providers better manage cost of goods sold (COGS), increase profit margins and automate and simplify contract and record management.


Cost of Goods Sold (COGS)

Cost of goods sold (COGS) refers to the direct inventory (or stock) costs of those goods a business has sold during a particular period. Costs are associated with particular goods based on set formulas, including specific identification, first-in first-out (FIFO) or average cost. COGS includes the costs of purchase, conversion, materials, inventory readiness and the direct labor costs of producing the goods and allocated overhead. COGS excludes indirect expenses such as distribution and sales. The costs of those goods not yet sold are deferred as costs of inventory until the inventory is sold or written down in value. COGS is also referred to as "cost of sales".

Reducing Costs, Improving Margins

Communications service providers (telecoms) spend a significant portion of their annual revenues on the procurement of goods and services. COGS is then calculated from average revenue per user (ARPU). When COGS is high, even minor cost reductions can produce the same margin lift as a big increase in sales. A coordinated strategic sourcing effort that identifies the best sources for goods and services, and negotiates the most favorable contracts with selected suppliers is one of the best and fastest ways to achieve that cost reduction. Even when most direct spending is capitalized, rather than expensed, small percentage savings negotiated with suppliers can significantly improve a communication service provider's bottom line. ASC's communication and telecom service provider contract management and business process management solutions help them better manage contracts and costs, operate more effectively and improve their bottom line.

Records Management

Determining costs requires keeping records of goods or materials purchased and any discounts on such purchases. In addition, if the goods are modified, the business must determine the costs incurred in modifying the goods (e.g., labor, supplies or additional material, supervision, quality control, use of equipment, and other overhead costs). Principles for determining costs may be easily stated, but application in practice is often difficult due to varied considerations in cost allocation. COGS may also reflect adjustments such as decline in the goods' value  (e.g., lower market value than cost), obsolescence, damage, etc.

When multiple goods are bought or made, it may be necessary to identify which costs relate to which particular goods sold. This may be done using an identification convention, such as specific identification of the goods, FIFO, or average cost. Alternative methods may be used in some countries, such as last-in-first-out (LIFO), gross profit, retail, or some combination thereof.

ASC contract management lifecycle (CLM) software and business process management solutions can automate and streamline communications record (forms) management and contract management for improved business intelligence and productivity.

ASC Solution Benefits

ASC solutions automate and simplify communication service provider records and contract management, supplier and customer relationship management as well as cost management, driving significant benefits including improved supplier/customer relationships, reduced costs, maximized revenue and  fast ROI.

ASC solutions help communication service providers and telecoms better manage contracts, costs and record keeping, improve supplier and customer relationships, increase margins and improve operations.

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