Owl Bookkeeping and CFO Services Logo White
Expert Bookkeeping At An Affordable Price

Expenses: SG&A vs COGS

What Is SG&A?

SG&A stands for Selling, General & Administrative Expense.

SG&A is reported on a business’s income statement and reflects the sum of all selling expenses (both direct and indirect).  Just what the acronym stands for, it’s the tracking of these three expenses , essentially a summary of all the expenses that it takes to run your business from top to bottom.

SG&A is a great tool to keep a macro view of your business so that you can navigate your way to success.

How is SG&A different from Profit and Loss (PNL)?

As a business executive, you’re no doubt familiar with profit and loss. After all, that’s probably what keeps you up at night. It’s what the board and your investors keep asking about.

But many business leaders gloss over the actual profit and loss statement. And that’s a mistake. Even if someone else is responsible for preparing, analyzing, presenting, and reacting to the profit and loss statement, it’s important that you — and, ideally, everyone else — truly understand what it means and how to make it a powerful tool for your business.

One of the most common problems with profit and loss statements is that different companies use different categories and terminology to refer to different types of expenses. This can lead to confusion and misunderstandings over what’s actually driving costs in your business.

We think it’s valuable to scrutinize your profit and loss statements to make sure everyone’s on the same page and nothing is able to hide.

Be sure to read our Complete Guide to SG&A to learn more about selling, general, and administrative expenses.

One place to start: Instead of simply looking at expenses at a whole, examine Cost of Service (COS) or Cost of Goods Sold (COGS) separately from Operating Expense (OE) or Sales, General, and Administrative Expense (SG&A).

Here’s more about what that means:


If you’re a service provider (as opposed to a widget seller), COS is relevant for you. Cost of Service includes every expense that directly relates to the service you provide. That typically includes compensation for the people who provide the service, along with any non-renewable supplies that are used in the process of providing the service.


For widget sellers, Cost of Goods Sold includes all expenses associated with the production of your widget. The expense occurs due to a sale (though the cost is usually incurred in advance of the sale, unless you produce to order).


Operating Expenses refer to the costs associated with (you guessed it) operating your business. Some of these expenses are totally static, such as your rent. Others, like advertising, may fluctuate somewhat. Regardless, operating expenses aren’t directly tied to sales and thus can put you in a big crunch if you’re in a sales slump. (Even if your widgets aren’t selling, you still need to keep your electricity on.)


For many businesses, SG&A expenses are exactly the same as Operating Expenses. Still, some businesses separate Sales, General, and Administrative Expenses, often as a line item under Operating Expenses. SG&A is a blanket label that can be used to lump salaries, marketing costs, insurance, and other items together.  This is often done if profit and loss statements need to be reported externally and business owners don’t want to report the exact details of employee compensation or other sensitive expenses.

What terminology does your business use? Where do marketing and advertising costs fall? If you’re in a crunch, where’s the least damaging place you can make a cut?

If you don’t have quick answers to these questions, it’s time to talk to someone who can help you sort everything out. (Pssst…we could be that someone.)

Owl Bookingkeeping Home
We have found that the cost savings and efficiencies of working with a company like Owl is more beneficial than hiring our own in-house employee.
With Owl’s in-depth knowledge of our business and an awesome attitude, our business continues to run smoothly.
Owl staff understands not only the financial side of business but is able to coach us on other aspects of business decisions and to help us define alternatives.
The attention to detail, coupled with an understanding of and willingness to dig in to our unique systems and processes has kept us running smoothly.
Previous slide
Next slide

Learn More About How OWL Can Help You

Owl Bookingkeeping Home Icon


Whether you need help with accounts payable, payroll or your monthly close, our accountants ensure these critical tasks are completed accurately and on time.

Owl Bookingkeeping Home Accounting Icon


When your books are up to date, you can respond to opportunities and challenges quickly. Accurate, bank-ready financials allow you to make better decisions for your company.

Owl Bookingkeeping Home Financial Planning Icon

Financial Planning

Gain access to powerful insight typically only available to companies that employ a full-time controller or CFO. Leverage their expertise when you need it, without adding to your payroll.

Freedom to Focus on Your Business

Our Partner Organizations →

Burns Engineering
Cooks Bellecour
Norway House
owl booking keeping deep see logo
Grey Ghost sound
owl booking keeping evo communication logo
Landlord Resource Network Logo
The Mad Hatter Tea House Logo
Pavement Resources Logo
Medical Alley Logo
Growing Edge Logo
Backstory Coffee Roasters
Claire Givens Violins INC
Asian American Organization Project
Beyond Words Co
Access Philanthropy

Get the Full View Your Business Financials

Just like an owl can turn their head 270 degrees to see the whole landscape, Owl Bookkeeping and CFO Services can help you see your full financial picture.

Call us today: (612) 816-6007