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Thread: Cost of Goods

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    OptiBoardaholic Optical Roy's Avatar
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    Cost of Goods

    I know every Optical is different, previous 2 Opticals, our lab bill was separate from our Optical bill in regards to cost of goods sold, due to the fact the lab bill was in essence already paid by the patient upon ordering, the frames purchased for possible sell is not guaranteed income.

    Where I am now, they include the lab with optical, which makes my cost of goods higher.

    Anybody else do it this way?

    Thanks
    Roy W. Jackson, Sr. ABOC

  2. #2
    What's up? drk's Avatar
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    COGS:
    optical laboratory
    frames

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    We are one of few offices not in a buying group. Our cost of goods is everything we order from cleaner to lab to each frame company. Anything optical related is our cost of goods. We are totally separate from our doctors office so our costs are our costs and our payments are our payments. It does make it easier to figure out profit.

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    OptiBoardaholic Optical Roy's Avatar
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    Quote Originally Posted by mervinek View Post
    We are one of few offices not in a buying group. Our cost of goods is everything we order from cleaner to lab to each frame company. Anything optical related is our cost of goods. We are totally separate from our doctors office so our costs are our costs and our payments are our payments. It does make it easier to figure out profit.
    Doesn't that bring your average COG up quite a bit?
    Roy W. Jackson, Sr. ABOC

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    Well technically it is the goods we are selling so it should count, right? As far as not being in a buying group, we do get a discount from most of our vendor to offset that. I'm confused as to why your lab bill wouldn't be part of your cost of goods. It's part of what you sell?

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    OptiBoardaholic Optical Roy's Avatar
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    Quote Originally Posted by mervinek View Post
    Well technically it is the goods we are selling so it should count, right? As far as not being in a buying group, we do get a discount from most of our vendor to offset that. I'm confused as to why your lab bill wouldn't be part of your cost of goods. It's part of what you sell?
    Lab are guaranteed sales, frames for the board are not.
    Roy W. Jackson, Sr. ABOC

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    Doesn't matter. It's the cost you have to be in business. We also include rent, paychecks, etc. It's all costs. The payment from our patients minus the costs of everything it takes to run the place is the profit. That's how every place I've ever worked at has been. If all I had to count was frames as costs... That would be awesome! Not sure what type of office you work in, but this is a private practice. We are owned by the ophthalmologist who is technically another office next door. We are one, but for business purposes, we keep all numbers separate.

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    OptiBoardaholic Optical Roy's Avatar
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    Quote Originally Posted by mervinek View Post
    Doesn't matter. It's the cost you have to be in business. We also include rent, paychecks, etc. It's all costs. The payment from our patients minus the costs of everything it takes to run the place is the profit. That's how every place I've ever worked at has been. If all I had to count was frames as costs... That would be awesome! Not sure what type of office you work in, but this is a private practice. We are owned by the ophthalmologist who is technically another office next door. We are one, but for business purposes, we keep all numbers separate.
    So what is your average COG
    Roy W. Jackson, Sr. ABOC

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    I couldn't tell you. I don't get the total. My office manager gets everything and it goes to the accountant. I just handle the day to day stuff. I see the statement from our lab because I have to reconcile that with the invoices, and I get the individual invoices for products we get in like frames, cleaning cloths and cleaner etc. All those get forwarded to the accountant. I guess I could get a program and keep track of it all, but I'm the ONLY person in optical and it's just too much. I just trust that the accountant calculates everything correctly. (It is an outside accounting firm so I believe them)

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    ***Fortunately the cost of the accountant doesn't come out of my numbers! Whew!

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    I can tell you that I keep track as much as I can with things. So for instance if I know this quarter is a bit slower than usual, maybe I'll wait a week to place a stock frame order if it means it will be in the next quarter. Little things like that.

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    Quote Originally Posted by mervinek View Post
    I can tell you that I keep track as much as I can with things. So for instance if I know this quarter is a bit slower than usual, maybe I'll wait a week to place a stock frame order if it means it will be in the next quarter. Little things like that.
    I do as well, like I have cancelled all reps for the rest of the year. I only exchange for big orders to offset the cost and split bill. My Optical is 30% COG, lab runs about 36% COG, combining the 2 makes it alot, national average for optical, excluding lab is around 25 to 30%.
    Roy W. Jackson, Sr. ABOC

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    My COG, is for the goods only. My gross profit is the result of the difference between the sale of the product and the cost of the product. Everything else is an expense.
    Deduct the expenses from the gross profit and that is the net profit. That's what goes to the bank.

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    What's up? drk's Avatar
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    COGS is fun and all, but it just comes down to a reasonable pricing structure.

    Set your prices with a fair metric, and review your lab and frame costs regularly, and COGS takes care of itself.

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    COGs=all optical goods sold, including accessories.
    Then, there are labor rates, supplies, tools, and overhead.
    Accounting separates these into individual line items.
    I bend light. That is what I do.

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    Quote Originally Posted by drk View Post
    COGS is fun and all, but it just comes down to a reasonable pricing structure.

    Set your prices with a fair metric, and review your lab and frame costs regularly, and COGS takes care of itself.
    +1 I do an annual review when new price lists come out.

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