What is COGS?
4 min read
COGS — Cost of Goods Sold — is the direct cost of the products you sold. It's the single most important number separating revenue from profit. Get it wrong, and every other business decision is built on sand.
The COGS definition
COGS is what you paid to produce or purchase the products you actually sold in a given period. If you sold 100 items and each cost you 120 EGP to source, your COGS is 12,000 EGP — for that period. Inventory you bought but haven't sold yet is an asset, not COGS.
COGS vs. total purchases
This is the most common mistake. You buy 200 units at 100 EGP each (20,000 EGP total). You sell 80 of them. Your COGS is 8,000 EGP — not 20,000 EGP. The remaining 120 units are inventory on your balance sheet. Confusing purchases with COGS overstates your costs and makes your business look less profitable than it is.
What goes into COGS
COGS includes: the purchase price of the product, import duties and customs fees, inbound shipping costs to get products to you. It does NOT include: your ads, your packaging (often counted as OPEX), your own salary, rent, or software costs.
Why COGS is the foundation of pricing
You can't set a price without knowing COGS. If a product costs you 200 EGP and you sell it for 250 EGP, you have a 20% gross margin. After a 15% return rate, COD fees, and ads, you might actually lose money on that sale. COGS gives you the floor — the minimum price at which a sale is worth making.
Tracking COGS per SKU
Every SKU needs a purchase price attached to it. When you record a sale, the system automatically calculates COGS by multiplying units sold by the purchase price per unit. This is exactly what Handlha does automatically — so you always know your gross profit in real time.
Handlha handles this for you
Stop tracking this in spreadsheets. 14-day free trial — no credit card needed.
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