How COGS Formulas help managing the financial information of projects

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Traditionally, the Cost of Goods Sold or COGS formula is not directly connected to project management, however, understanding and leveraging the value this formula throws can enhance the budgeting precision and overall project profitability. On the other hand, in product-oriented businesses, COGS principles, in the shape of direct costs, can significantly benefit project managers in software development, consulting, and other IT fields.

In this short blog, we summarize COGS, why you should consider using it in your project budgeting (read it here in full), and which alternative you have to keep track of valuable financial information for projects, especially if you’re using Atlassian tools.

What is COGS?

COGS are the direct costs involved in creating or delivering a product or service, and the formula:

                  COGS = Beginning Inventory + Purchases - Ending Inventory

It can be adapted to help track costs like labor, materials, and tools consumed during project execution.

Why COGS could be useful for Project Management?

Using the COGS formula could help project managers to:

1. Enhance budget management: Especially if you’re using a tool like Budgety for Jira, using this formula you can accurately track and allocate direct costs, ensuring projects stay within budget.

2. Optimize profitability: Assess financial feasibility, allowing the calculation of margins for a better pricing strategy.

3. Accurate financial information will allow making informed adjustments to sourcing, production, and resourcing more simply.

4. Track budget performance: Monitor financial efficiency and align costs with project goals, especially if you are using Jira and Budgety.

While tracking this financial information using tools like Excel, is perfectly possible, however, it makes it less usable and difficult to track in a corporate world that every day demands focus on different areas. Tools Jira, usually common to project management, integrates solutions like Budgety, enabling comprehensive budget management and cost tracking, offering:
Monitorization of where the resources are spent, adjustment of budgets dynamically according to time spent on them or the variation of the cost input, better labor and material costs control for higher profitability, also allowing to link budgets to specific projects and work items.

How do the projects find benefits from COGS, Jira, and Budgety?

Budgety equips teams with the tools to manage direct and indirect costs (CAPEX and OPEX too) efficiently within Jira, aligning financial oversight with project goals. By leveraging this approach, project managers can reduce inefficiencies, control expenses, and drive profitability in different initiatives.

Integrating COGS formulas and solutions like Budgety into your project management ensures accurate budgeting and more robust financial control, empowering projects to deliver results successfully while maintaining cost efficiency and boosting profitability.