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Does reducing my e-commerce business inventory affect my COGS?

Asked 2 years ago

This morning I received my income statement, and when I checked for the COGS, I noticed that the figure was higher than last month. My stock wasn't moving the month before, and my COGS wasn't as high as this. I decreased the amount of stock I bought due to it not moving and re-evaluated my niche. Seeing my COGS as high as it was this month was a total shock. It doesn't make much sense to me.

Fredrick Fox

Sunday, August 07, 2022

Yes, reducing the business's inventory will affect the COGS which will, in turn, affect the gross profit. The formula for COGS is opening inventory + purchases - closing inventory. A reduction of inventory can reduce the closing inventory which increases the COGS. Or it can reduce the opening inventory which also increases the COGS.

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