Expense or COGS

[Inn-Nerd]

Hi all,
What is the most common practice when accounting for labor on one's P/L? As COGS or as Cost of Labor Expense? While it may seem obvious to many that Cost of Labor Expense would be the default, allow me to submit some examples:
Since Housekeeping is directly proportional to Occupancy, is it COL-COS (Cost of Labor / Cost of Services) or COL-Expense (Cost of Labor / Expense)
Since an Innkeeper is a constant cost, COL-Expense seems appropriate.
If one contracts independent contractor massage therapists, should that be COL-COS (Cost of Labor / Cost of Services), COL-Expense (Cost of Labor / Expense), or COS-COS (Other Costs of Services / Cost of Services)?
Thanks!

 

[MtnKeeper]

I have two housekeepers. All I do is provide the accountant with the total of their pay and my related expenses for employment tax and she takes care of it - it shows as a labor cost.

 

[GoodScout]

I think if you try and rationalize it too much, almost everything can be a COGS in our industry. I keep labor in my expense section, not COGS. Yes, it is related to your sales velocity, but that doesn't give me good information to work with. I have a handyman that works for me year-round.
As to a chart of accounts, I think you need to remember what it's for: To give you quick information on how your business is operating. I started out with a very detailed COA, and gradually merged categories and reduced the number of accounts. Do you really need to differentiate your repair expenses from your equipment rental expenses from your small tools and equipment?
Bottom line it: Ask yourself with each account: What is breaking this out separately going to tell me each month that will help me manage my sales and expenses better? If you don't plan to be picking at nits (and I guarantee you as an innkeeper you'll be lucky to devote an hour or two each month to drilling down deep into your P&L) then you're just creating busy work for yourself.

 

[user 26]

Same advice I gave you in your other thread applies here ... you aren't running a basic b&b or inn ... and you need the services of an accountant to set you up right at the start. The more complex your situation, the more I think you need an expert in the field.

 

[Tom]

I think if you try and rationalize it too much, almost everything can be a COGS in our industry. I keep labor in my expense section, not COGS. Yes, it is related to your sales velocity, but that doesn't give me good information to work with. I have a handyman that works for me year-round.
As to a chart of accounts, I think you need to remember what it's for: To give you quick information on how your business is operating. I started out with a very detailed COA, and gradually merged categories and reduced the number of accounts. Do you really need to differentiate your repair expenses from your equipment rental expenses from your small tools and equipment?
Bottom line it: Ask yourself with each account: What is breaking this out separately going to tell me each month that will help me manage my sales and expenses better? If you don't plan to be picking at nits (and I guarantee you as an innkeeper you'll be lucky to devote an hour or two each month to drilling down deep into your P&L) then you're just creating busy work for yourself..

Good advice: we too started with a fairly elaborate Chart and have simplified it to provide only information we need to fill out US IRS tax forms (Sch C and Use of Home) and to track expense categories that drive our decision making (e.g. $ spent on advertising). Turns out, searching by vendor -- how much did we pay to XX last year -- was more useful than having a bunch of detailed sub accounts.