Aug 14, 2025

Daily vs. Monthly COGS Tracking for Shopify Merchants

Saman Izadiyar

Cost of Goods Sold (COGS) tracking frequency directly impacts your ability to make profitable decisions. Track COGS monthly, and you're making pricing decisions based on outdated information. Track daily, and you need robust systems to handle the complexity.

This guide examines both approaches, helping Shopify merchants choose the right COGS tracking frequency based on business size, complexity, and growth stage.

Understanding COGS in Shopify Context

What Counts as COGS for Shopify Stores

COGS includes all direct costs to acquire or produce sellable inventory:

Product costs - Manufacturing or wholesale purchase price
Inbound shipping - Freight to get products to your warehouse
Import duties and customs - For international sourcing
Payment processing on product costs - Fees on supplier payments
Direct labor - Assembly, customization, or packaging labor
Materials and packaging - Boxes, labels, inserts included with products

What's NOT COGS

These expenses belong in operating costs, not COGS:

Outbound shipping (shipping to customers)
Shopify platform fees
Payment processing on sales
Marketing and advertising
General administrative costs
Warehouse rent and utilities

COGS Formula for Shopify

COGS = Beginning Inventory + Purchases - Ending Inventory

This formula works for any tracking frequency - daily, weekly, or monthly calculations use the same methodology.

Daily COGS Tracking: Real-Time Profit Visibility

Benefits of Daily Tracking

✅ Immediate Decision Making
See profit impact of pricing changes, promotions, or product mix shifts within 24 hours instead of waiting until month-end.

🚨 Early Problem Detection
Identify cost increases, inventory shrinkage, or margin erosion before they become significant issues.

💡 Dynamic Pricing Optimization
Adjust prices based on real-time costs and competitive dynamics rather than month-old data.

⏰ Cash Flow Accuracy
Better predict cash needs based on actual daily inventory consumption rather than estimates.

Technical Requirements for Daily COGS

Automated Inventory Valuation

Manual daily calculations are impractical. You need:

Real-time inventory tracking system
Automated cost basis updates
Integration between Shopify and accounting software

Robust Chart of Accounts

Daily tracking needs detailed categorization:

5000 - Cost of Goods Sold
  5010 - Product Costs
  5020 - Inbound Freight
  5030 - Customs and Duties  
  5040 - Packaging Materials
  5050 - Direct Labor

Integration Architecture

Seamless data flow between systems:

Shopify → inventory movement data
Accounting software → cost basis and financial reporting
Inventory management → real-time stock levels and valuations
Purchasing system → new cost data

Daily Tracking Implementation

Step 1: Configure Inventory Costing Method

Choose between FIFO, LIFO, or weighted average. Most Shopify stores use FIFO (First In, First Out) for accurate profit tracking.

FIFO Example

Purchase 1: 100 units at $10 = $1,000
Purchase 2: 100 units at $12 = $1,200
Sale: 50 units
Daily COGS = 50 × $10 = $500
Remaining inventory = 50 units at $10 + 100 units at $12

Step 2: Automate Cost Updates

Purchase orders automatically update cost basis
Receiving confirmations trigger inventory increases
Sales orders trigger COGS calculations
Returns adjust both inventory and COGS

Step 3: Set Up Daily Reporting

Essential daily metrics:

Gross margin percentage by product
Total COGS as percentage of revenue
Inventory turnover rate
Margin trends vs. previous periods

Daily COGS Success Metrics

Gross margin variance: <2% from target daily
Inventory accuracy: >98% on cycle counts
Data latency: <4 hours from sale to COGS recording
Exception reporting: All margin anomalies flagged automatically

Monthly COGS Tracking: Simplified Implementation

Benefits of Monthly Tracking

🔍 Lower Implementation Complexity
Monthly tracking works with basic accounting software and manual processes.

💰 Cost-Effective for Small Businesses
Minimal software costs and can be handled by existing team members.

✅ Sufficient for Stable Operations
Works well for businesses with predictable costs and limited product variety.

Monthly Tracking Process

Week 1-3: Accumulate Data

Record purchases as they occur
Track inventory receipts and adjustments
Monitor sales volume and product mix

Week 4: Calculate and Record COGS

Monthly COGS Calculation:
Beginning Inventory (from last month): $25,000
+ Purchases this month: $15,000
- Ending Inventory (physical count): $22,000
= Cost of Goods Sold: $18,000

Month-End Reconciliation:

Physical inventory count
Adjustment for shrinkage or damage
Variance analysis vs. expected COGS
Update accounting records

Monthly Tracking Limitations

🚨 Decision-Making Delays

Can't respond quickly to:

Supplier cost increases
Margin compression from competition
Inventory shrinkage or theft
Product mix changes affecting profitability

Choosing the Right Approach

🔧 Daily Tracking is Best For:

Revenue over $1M annually
100+ SKUs in inventory
Frequent price changes
Multiple sales channels
Investor reporting requirements

💰 Monthly Tracking Works For:

Revenue under $500K annually
Limited SKU count (<50)
Stable pricing and costs
Single sales channel
Owner-operated businesses

Implementation Recommendations

For Daily Tracking Success

Invest in proper integrations between Shopify and accounting software
Train team on importance of accurate data entry
Set up automated exception reporting
Review and adjust processes monthly

For Monthly Tracking Success

Maintain detailed purchase records throughout the month
Schedule monthly inventory counts
Create standardized COGS calculation templates
Plan transition to daily tracking as you scale

⏰ The Bottom Line

Your COGS tracking frequency should match your business complexity and decision-making needs. Start with monthly tracking if you're small and simple, but plan for daily tracking as you grow. The investment in real-time visibility pays off through better pricing decisions, improved cash flow management, and higher overall profitability.