# COGS Mapping

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### COGS variable mapping into the P\&L

Each COGS variable has:

* A **type** set to COGS.
* A **category and subcategory** such as `COGS - Materials`, `COGS - Direct Labour`, `COGS - Fulfilment`.
* A **branch** where the cost is incurred.

In the P\&L:

* All COGS variables are aggregated into the COGS section under Revenue.
* Categories and subcategories define the visible breakdown.
* COGS reduces Revenue to generate **Gross Profit** and **Gross Margin**.

COGS mapping is the key to understanding the direct cost of delivering revenue.
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{% step %}

### COGS mapping into the Balance Sheet

COGS mapping affects the Balance Sheet through **Accounts Payable**.

Rules:

* COGS is accrued in P\&L when the cost is incurred in order to generate revenue.
* If payment occurs later than accrual, the difference accumulates as Accounts Payable.
* When cash is paid, Accounts Payable decreases and Cash decreases.

This is driven by the variable's delay or payment term settings. There is no separate manual AP input.
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### COGS mapping into the Cashflow Statement

In the Cashflow Statement:

* COGS contributes to **Payments to suppliers** within **Operating cashflows**.
* Cash outflows occur when payments are made, not when COGS is accrued.
* Working capital movements show the net effect of changes in Accounts Receivable and Accounts Payable.

This ensures operating cashflow reflects both gross margins and supplier payment behaviour.
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{% step %}

### COGS mapping into the Cash Waterfall

In the Cash Waterfall:

* COGS appears directly under Revenue, matching the P\&L view.
* Gross Profit and gross margin are visible.
* Changes in net working capital then reconcile accrual based results to cash based flows.

This layout makes it easy to see both the economic margin structure and the cash impact of COGS.
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{% step %}

### Designing COGS categories

Good practice:

* Separate COGS into distinct drivers of unit economics, for example:
  * Materials.
  * Direct labour.
  * Freight and logistics.
  * Merchant and payment processing fees.
  * Platform or hosting costs that scale with usage.
* Align COGS categories with your customer or revenue segmentation.
* Avoid mixing fundamentally different behaviours in a single COGS category where possible.

Clean COGS mapping makes it easier to track gross margin by product, channel or segment.
{% endstep %}

{% step %}

### Scenarios and COGS mapping

In scenarios:

* You may alter unit costs, percentage of revenue COGS, or payment terms.
* The mapping structure usually remains constant so that Gross Profit can be compared across scenarios.
* Scenario level changes in COGS combine with revenue changes to drive margin and cash differences.

This supports margin sensitivity analysis and cost optimisation exercises.
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## Related articles

* [Project Cash Flow (Milestones)](/use-cases/construction-and-contracting/project-cash-flow-milestones.md)
* [Build a Dilution / Cap Table Impact Model](/how-tos/investment-and-transactions/build-a-dilution-cap-table-impact-model.md)
* [Revenue Mapping](/help/financial-outputs-and-valuation/revenue-mapping.md)
* [Timing Modal Overview](/syntax/timing-syntax/timing-modal-overview.md)


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