The term COSS, (Cost Of Services Sold) is not a generally recognized accounting term and is likely to frustrate your accountant if you use it with them in an accounting conversation. However, as a method to help entrepreneurs think specifically about the financial and operational inputs required to perform a service; especially for the purposes of budgeting and setting prices, it is completely valid and widely accepted regardless of where the inputs show up on financial statements.
What goes into COSS?
Similar elements to what goes into COGS except instead of counting the material inputs needed to make a product you count the non-physical inputs needed to perform a service.
Types on non-physical inputs needed to perform a service:
There could be a wide variety of inputs needed to provide a service depending on the industry you are in and the markets you serve. Some examples of common service inputs are: Specialized software, lab access, access to specialized data repositories, online file storage, professional certifications or licensure, etc. Depending on your business, any of these could be absolutely necessary for you to provide your service safely, legally or in accordance with your industry norms.
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