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How to reconcile changing COGS

David Tran
on 8/13/13, 6:33 AM 2,722 views

We have the following problem (an example):

  • On July 13, our partner signs with us a consignment contract to sell their goods. This means they will deliver to us a certain number of their goods that we keep in our warehouse. When we sell these products, we will pay the supplier (and keep the margin). This is consignment.

  • On July 14, partner delivers 1,000 ABC Widgets to our warehouse. The cost per Widget is $5 (COGS).

  • On July 20, we well on our website all 1,000 ABC Widgets for the price of $8 each. We have made $3 per ABC Widget sold. We have not paid the supplier yet as payment is reconciled at end of the month.

  • On July 25 our partner decides to do a promotion where they discount their COGS price from the original $5 to $3. This means the original cost that was contracted has now changed.

  • On July 30, it is time to reconcile the cost of what was sold to partner. Originally we were supposed to give back to the partner $5,000 (since $5 COGS x 1,000 widgets = $5,000). However, due to the promotion and price change that occurred halfway, the amount owed to the partner is actually $3,000 (since $3 COGS x 1,000 widgets = $3,000).

As you can imagine, this issue is causing problems with accounting (who now does not have an accurate cash flow profile) as well as our internal systems (knowing our actual Gross Margins in near real-time is important for our business).

Is there a way to allow for Accounting and relevant staff to adjust the price of COGS in our OpenERP modules on products after-the-fact to account for the above situation?

On 8/13/13, 9:55 AM

Assume your costing method is Average ? COGS is calculated base on your invoice payment to supplier therefore it's not going to be "realtime" until the goods is invoiced.

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Asked: 8/13/13, 6:33 AM
Seen: 2722 times
Last updated: 3/16/15, 8:10 AM