fbpx

Metric – The most founder friendly finance app in the world!

Menu

What is the Difference between expenses and COGS?

3,471 Comments / By /

Many people have a difficult time understanding the difference between cost of goods sold (COGS), and operating expenses. It is normal to feel confused, after all, both are essentially money that is being spent from your business.

 

However, COGS and operating expenses are fundamentally different, and both show different things about your company’s financial health.

 

Whether you are a new business owner, or simply new to the world of accounting, it will benefit you to understand the difference between expenses and cost of goods sold.

 

What is the Cost of Goods Sold (COGS)?

The cost of goods sold (COGS), also sometimes referred to as cost of sales (COS), or cost of revenue (COR), refers to all the money your business spends creating and delivering your final goods or service.

 

This includes everything that goes directly into making the product and delivering it to your customers. For example, if you are producing shirts, then the cost of goods sold would include the cost of thread, cloth, dyes, wages for manufacturing labour, and whatever freight costs are included in the production or delivery.

 

It is very important to note that the COGS does NOT include indirect or overhead costs such as wages, rent, or utilities.

 

Simply put, the cost of goods sold accounts for all the direct costs of producing the actual goods or services that your business makes.

What are Operating Expenses (OPEX)?

On the other hand, operating expenses refer to all the indirect and overhead expenses that are involved in running your business (but not in directly producing the products).

 

As we all know, there is a lot more that goes into running a business apart from the production of your main service offering. Utilities, rent, salaries, marketing and advertising expenses, and legal fees are just a few of the many indirect expenses that your business will incur.

 

Therefore, when creating financial statements, operating expenses refer to all the overhead and indirect costs involved in your business.

 

What Do COGS and OPEX Tell You?

On one hand, the cost of goods sold tells you how efficient you are in making your product or service. You may have high revenues, but if the COGS is very high, it is possible that you will have low profit margins.

 

OPEX, on the other hand, tells you how efficient you are at running your business overall. If you find that operating expenses are skyrocketing, it may be due to extra expenses that are falling through the cracks, or that there are expenses that you simply cannot afford.

 

Investors will take a look at your financial records and assess both COGS and OPEX when performing their due diligence. Therefore, it is important to keep accurate records of both.

 

The Best Accounting and Bookkeeping Services in Pakistan

Vixperts offers the best accounting, bookkeeping, and financial services for Pakistani businesses and startups. Turn to us for all your virtual CFO, financial modelling, valuation, accounting & taxation, investor due diligence, and policy control design needs. Contact now for a FREE  diagnosis of your company’s financial health!

3,471 thoughts on “What is the Difference between expenses and COGS?”

  3. On-page SEO

    Hi! I could have sworn I’ve been to this site before but
    after browsing through some of the post I realized it’s new to me.
    Anyways, I’m definitely happy I found it and I’ll be
    book-marking and checking back frequently!

  5. 토토사이트

    Hey there! I know this is kinda off topic but I
    was wondering which blog platform are you using for this
    website? I’m getting fed up of WordPress because I’ve had
    issues with hackers and I’m looking at alternatives for another platform.
    I would be fantastic if you could point me in the direction of a good platform.

    Also visit my web-site; 토토사이트

  19. ddownr

    What i don’t understood is in fact how you are not really a lot more well-liked than you might be now.
    You are so intelligent. You know thus significantly in terms of this subject, produced me in my view consider it from numerous various
    angles. Its like men and women don’t seem to be interested unless it’s something to do with Woman gaga!
    Your personal stuffs outstanding. At all times care for it up!

  25. yukslot88

    whoah this weblog is wonderful i really like reading your posts.
    Keep up the great work! You know, many persons are searching
    around for this info, you could help them greatly.

  26. https://doodleordie.com/profile/wstar77live

    Hi superb website! Does running a blog like this require a
    great deal of work? I’ve virtually no understanding of programming however I had been hoping to start my
    own blog in the near future. Anyhow, should you have any
    recommendations or techniques for new blog owners please share.
    I know this is off subject but I simply needed to
    ask. Appreciate it!

  48. https://articledirectoryzone.com/members/vn678us/

    Howdy I am so thrilled I found your webpage, I really found you by accident, while I was researching on Aol for something else, Nonetheless I am here now
    and would just like to say thanks for a fantastic post and
    a all round enjoyable blog (I also love the theme/design),
    I don’t have time to read it all at the minute but I have book-marked it and also added in your RSS feeds, so when I have time I will
    be back to read more, Please do keep up the excellent work.

  55. 사설토토

    My brother recommended I might like this web site.
    He was totally right. This post truly made my day.
    You cann’t imagine simply how much time I had spent for this information! Thanks!

  61. http://molbiol.ru/forums/index.php?showuser=1275907

    Just want to say your article is as astonishing.
    The clearness in your post is just excellent and i could assume
    you are an expert on this subject. Fine with your permission allow me to grab
    your feed to keep up to date with forthcoming post.
    Thanks a million and please keep up the gratifying work.

  69. slot via ovo

    It’s actually a great and useful piece of info. I am satisfied
    that you simply shared this helpful information with us.
    Please stay us informed like this. Thanks for sharing.

  77. 툰코

    Attractive section of content. I just stumbled
    upon your weblog and in accession capital to
    assert that I get in fact enjoyed account your blog posts.
    Anyway I will be subscribing to your feeds and even I achievement you access consistently quickly.

  86. That-girl-guided-journal

    I am curious to find out what blog system you have been utilizing?
    I’m experiencing some minor security problems with my latest website and I would like to find something
    more safeguarded. Do you have any solutions?

  89. fun88

    It’s a pity you don’t have a donate button! I’d definitely
    donate to this excellent blog! I suppose for now i’ll settle for
    book-marking and adding your RSS feed to my Google account.

    I look forward to fresh updates and will share this website with my Facebook group.
    Talk soon!

  94. Semen Retention and Yoga

    Greetings from Carolina! I’m bored to tears at work
    so I decided to check out your website on my iphone during lunch
    break. I really like the info you present here and can’t wait to take
    a look when I get home. I’m surprised at how quick your blog loaded
    on my cell phone .. I’m not even using WIFI, just 3G ..
    Anyhow, awesome site!

  102. kelebihan mobil daihatsu

    Excellent article. Keep posting such kind
    of info on your page. Im really impressed by it.
    Hello there, You have performed an excellent job. I will definitely digg it and individually recommend to my friends.
    I am sure they will be benefited from this website.

  109. tangkasnet

    Wonderful beat ! I would like to apprentice while you amend your
    website, how could i subscribe for a blog website?
    The account aided me a acceptable deal. I had been tiny bit
    acquainted of this your broadcast offered bright clear concept

  118. magic wand vibrator

    I was suggested this blog by way of my cousin. I am no longer
    certain whether or not this submit is written by way of him as no one else recognize such specified about my trouble.
    You are amazing! Thank you!

  151. Crypto experts

    Hey! I realize this is somewhat off-topic but I had to ask.
    Does building a well-established blog like yours require a large amount of
    work? I am completely new to running a blog but I do
    write in my journal daily. I’d like to start a blog so I
    can easily share my experience and thoughts online. Please
    let me know if you have any kind of suggestions or tips
    for new aspiring bloggers. Thankyou!

  156. Crypto news

    Greate pieces. Keep posting such kind of info on your page.
    Im really impressed by it.
    Hello there, You’ve performed an excellent job.

    I will certainly digg it and in my view suggest to my friends.

    I’m confident they’ll be benefited from this site.

  158. 온라인카지노 추천

    When I originally commented I seem to have clicked on the -Notify me when new
    comments are added- checkbox and now every time a comment is added I receive 4 emails with
    the same comment. Perhaps there is a way you are
    able to remove me from that service? Appreciate it!

  175. elux legend 3500 puffs

    Good post. I learn something new and challenging on blogs I stumbleupon on a daily basis.
    It’s always exciting to read through content from other writers and practice something from other
    websites.

  209. End Mill With Radius

    Superb blog you have here but I was wanting to know if you knew of any
    message boards that cover the same topics discussed in this article?
    I’d really love to be a part of community where I can get
    responses from other experienced people that share the
    same interest. If you have any recommendations, please let me know.

    Many thanks!

    my blog post … End Mill With Radius

  301. reformas en zaragoza

    Do you mind if I quote a couple of your posts as long as
    I provide credit and sources back to your webpage?
    My website is in the exact same niche as yours and my visitors would really benefit
    from a lot of the information you present here.
    Please let me know if this okay with you. Many thanks!

  374. ダッチワイフ

    You can definitely see your enthusiasm in the article you write.
    The sector hopes for more passionate writers such as you who aren’t afraid to say how they
    believe. Always go after your heart.

  399. 노래방 알바

    The framework agreement only partly meets those demands – it creatss a
    smaller recurring neighborthood fund of $600,000
    and ends a practice of holding up transcripts forr unpaid fines.

    Feel free to visxit my page :: 노래방 알바

  405. ปั่นสล็อด

    Thanks on your marvelous posting! I definitely enjoyed reading it, you can be a great author.I
    will always bookmark your blog and will come back later on.
    I want to encourage yourself to continue your great writing, have a nice afternoon!

  417. slot bank bsi

    Hello there! I just want to offer you a huge thumbs up for your excellent information you have got right here on this
    post. I’ll be coming back to your website for more soon.

  420. cock extender

    Greetings from Ohio! I’m bored to tears at work so I decided to
    check out your blog on my iphone during lunch break. I
    love the info you provide here and can’t wait to take a look when I
    get home. I’m surprised at how quick your blog loaded on my phone ..
    I’m not even using WIFI, just 3G .. Anyhow, awesome blog!

  437. Antonia

    Hey there! I know this is somewhat off topic but I was wondering if you
    knew where I could find a captcha plugin for my comment form?

    I’m using the same blog platform as yours and I’m having difficulty finding one?
    Thanks a lot!

  449. review

    Hurrah! After all I got a blog from where I know how to truly
    take useful information concerning my study and knowledge.

  453. see

    Everyone loves what you guys tend to be up too. This sort of clever work and coverage!
    Keep up the wonderful works guys I’ve included you guys to our
    blogroll.

  456. important link

    Hi there, just became alert to your blog through Google, and found that
    it is truly informative. I’m going to watch out for brussels.
    I will be grateful if you continue this in future.

    Many people will be benefited from your writing. Cheers!

  486. reformas viviendas zaragoza

    I think that everything composed made a great deal of sense.
    But, what about this? what if you were to write a awesome headline?
    I mean, I don’t want to tell you how to run your website,
    but what if you added a headline that makes people want more?
    I mean What is the Difference between expenses and
    COGS? – Metric – The most founder friendly finance
    app in the world! is a little boring. You might peek at Yahoo’s home
    page and watch how they create news headlines to get viewers interested.
    You might add a related video or a related pic or two to grab people interested about everything’ve got to say.
    In my opinion, it would make your posts a little bit
    more interesting.

  501. SEO Tools

    Greetings! Very helpful advice in this particular post!
    It’s the little changes that make the most significant
    changes. Many thanks for sharing!

  525. slot mahjong ways 3

    Hmm it looks like your site ate my first comment (it was super long)
    so I guess I’ll just sum it up what I wrote and say, I’m thoroughly enjoying your
    blog. I too am an aspiring blog blogger but I’m still new to everything.
    Do you have any suggestions for rookie blog writers?

    I’d really appreciate it.

  553. 정품비아그라 판매 하는 곳 바로가기 gogo

    I’ve been exploring for a little bit for any high-quality
    articles or weblog posts in this sort of area . Exploring in Yahoo I ultimately stumbled upon this website.
    Reading this info So i’m happy to convey that I’ve an incredibly excellent uncanny feeling I found out exactly what I needed.
    I so much certainly will make sure to don?t fail to remember this web
    site and give it a glance on a constant basis.

  580. idebet

    Does your website have a contact page? I’m having trouble locating it but, I’d
    like to shoot you an email. I’ve got some recommendations for your blog you might be interested in hearing.
    Either way, great website and I look forward to seeing it develop
    over time.

  581. here

    Hi there, I desire to subscribe for this blog to obtain most up-to-date updates,
    therefore where can i do it please help.

  590. slot pulsa

    My family every time say that I am killing my time here at
    web, however I know I am getting experience all the time by reading thes good articles or reviews.

  656. bunny vibrator

    I know this web page offers quality based articles or reviews and other stuff,
    is there any other web site which offers these kinds of
    information in quality?

  657. Website Optimization

    Hello I am so delighted I found your blog page, I really found
    you by error, while I was looking on Askjeeve for something
    else, Anyways I am here now and would just like to say thanks for a fantastic post and a all round entertaining
    blog (I also love the theme/design), I don’t have time to read it all at the minute but I
    have bookmarked it and also included your RSS feeds, so when I have time I
    will be back to read more, Please do keep up the superb job.

  661. bodywand mini massager

    Hi I am so happy I found your blog page, I really found you by mistake, while
    I was looking on Yahoo for something else, Regardless
    I am here now and would just like to say thank you for a remarkable post
    and a all round exciting blog (I also love the theme/design), I don’t have time to look over it all at the moment but I have book-marked it and also
    added your RSS feeds, so when I have time I will be
    back to read a great deal more, Please do keep up the
    superb b.

  666. Pay Per Click

    Wonderful site. A lot of useful info here. I am sending it to several buddies ans additionally sharing in delicious.

    And certainly, thank you to your sweat!

  720. 출장홈타이

    Thanks for finally writing about > What is the Difference between expenses and COGS?
    – Metric – The most founder friendly finance app in the world!
    < Liked it!

  730. 스웨디시

    Hey there! I just wanted to ask if you ever have any
    trouble with hackers? My last blog (wordpress) was
    hacked and I ended up losing a few months of hard work
    due to no data backup. Do you have any methods to prevent hackers?