Cost of Sales (CoS)
Total direct costs attributable to generating sales revenue
What is Cost of Sales (CoS)?
Cost of sales is the total cost of running the sales function: salaries, commissions, travel and other direct selling costs. It shows what it costs to generate revenue.
Understanding it helps judge sales efficiency and decide how much to invest in the team.
How this KPI is measured
- Function
- Sales
- Sub-function
- Sales Cost Management
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- $
- Measurement frequency
- Monthly / Quarterly
- Formula
- Sum of salaries, commissions, travel, and direct sales costs
How to calculate it
Add up salaries, commissions, travel and direct sales costs in the period.
For example, salaries of 900,000, commissions of 240,000, travel of 120,000 and other costs of 60,000 give a cost of sales of 1,320,000.
Decide what to include, such as tools and management, and stay consistent.
Where it is used
Judging efficiency
Compare cost with revenue.
Budgeting
Plan sales investment.
Testing new approaches
Compare cost of channels.
How to improve it
Tips and common mistakes
- Read with revenue generated, not alone.
- Include the cost of tools and support staff.
- Compare by channel.
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