Skip to main content

Managing Dropshipping (Sales-Based COGS)

Learn how to setup and manage dropshipping if you are using our sales-based COGS method

Written by Emily Burrows

About

If you sell through dropshipping, your customers place orders in your store, but the products are stored, packed, and shipped by your vendor or third-party supplier, not by you.

Since these items never pass through your own warehouse, they need to be tracked differently in your books.

As part of setting up your sales-based inventory, we’ll ask whether you use dropshipping. If you select Yes, you’ll go through a short guided setup to identify your dropshipping warehouses, vendors, and payment terms, so Finaloop can set up your accounting for these orders.

1. Dropshipping overview

To get an overview of how we support dropshipping sales, check out this quick video:

2. How we determine your dropshipping treatment

Based on your answers in the guided setup, we’ll automatically choose the best way to track your dropshipping orders and payments.

There are two possible solutions.

Solution 1: Based on dropshipping transactions or bills

  • For orders marked as dropshipping, we don’t calculate COGS at the time of the sale.

  • When we detect a dropshipping transaction (via a bank transaction or bill), we record it as COGS directly on your P&L on the date of the transaction.

This keeps both your COGS and inventory numbers accurate, with no extra work for you.

Solution 2: Based on dropshipping costs per unit

Finaloop tracks your sales based on how each order is fulfilled and applies the relevant cost per unit to calculate accurate COGS. In other words, when we see an order fulfilled from your dropshipping warehouse or from a dropshipping vendor, we’ll calculate COGS using a separate dropshipping cost per unit you provide.

This setup lets you:

  • Use different costs per unit for each fulfillment method.

  • Keep COGS most accurate and your books clean.

While this method requires a bit more input in adding your additional costs per unit for the dropshipping products, it produces the most precise COGS.

You can update dropshipping costs for each relevant SKU or you can update all dropshipping product costs at once using the Bulk Costs Edit tool.

How to add/update your dropshipping costs per unit

Updating each dropshipping item separately

  1. Go to Inventory>Products.

  2. Click on the product in which you want to add dropshipping costs.

  3. Click on the Cost per unit tab. There you can separate costs for General and for Dropshipping.

  4. Click +Add cost.

  5. Add the date from which you want to apply the dropshipping cost.

  6. Add the cost per unit.

  7. Click Save.

Updating dropshipping items in bulk

  1. Go to Inventory>Products.

  2. Click Actions> Bulk cost edit.

  3. Click on the Dropshipping tab.

  4. Under the Average cost column, update the relevant costs, or click Import CSV and follow the instructions provided.

During setup, we’ll ask a few quick questions to determine which solution best fits your business and how we should set up your dropshipping in Finaloop.

3. Setting up dropshipping in Finaloop

We'll walk you through a guided setup, asking the following questions

3.1. Select your dropshipping warehouses

We automatically sync your warehouses from Shopify. Choose the ones used for dropshipping fulfillment and (not your own inventory).

Select all relevant warehouses. Any order marked as fulfilled in Shopify from these warehouses will be automatically treated by Finaloop as dropshipping.

3.2. Set your dropshipping vendor rules

Next, Finaloop automatically detects vendors categorized (either by you or automatically) as dropshipping providers.

Review the list and confirm all your dropshipping vendors are included, or add any missing vendors if needed. Once saved, Finaloop automatically classifies all transactions tied to those vendors as Dropshipping.

3.3. Clarify payment terms & bills

Finally, we’ll ask about your payment terms with your vendors. Some vendors require immediate payment, while others allow you to pay some days after the order.

If a vendor gives you 3 or more days to pay, select Yes. If not, select No. If you select Yes, you’ll also be asked on average, how many dropshipping bills or payments do you have per month.

Your answer helps us choose the dropshipping solution that best aligns your expense timing with your payment terms, while keeping your manual work to a minimum.

4. Changing your dropshipping setup

If you ever want to switch between the two options, contact Finaloop Support via chat or email. Our team can update your configuration to match the way you manage your dropshipping operations.

Need Help?

Contact our Support team anytime through chat or at [email protected].

Did this answer your question?