Accounting for supplies and packing materials

Know when to track packing materials as supplies — and when they belong in your product costs

Spending money on boxes, tape, and labels, but not sure where those costs should go? Here's how to classify supplies and packing materials so your Cost of Goods Sold (COGS) stays accurate and your end-of-year numbers tell the real story.

Not all packing and supply costs belong in the same bucket — some are indirect expenses that stay out of COGS, while others are part of your product's presentation and should be included.

In this article:

• What are supplies?
• Recording supplies in Craftybase
• Handling packing materials
• Quick reference

What are supplies?

Supplies are materials that are not treated as inventory. They generally fall into two categories:

• Indirect materials — items not used directly in manufacturing your products (e.g., envelopes, shipping boxes).
• Non-measurable production materials — items used in production but not easily tracked per unit (e.g., thread, glue).

How supplies are treated

Supplies should typically be recorded as purchases, not as materials used in inventory. This is because:

• Supplies are usually expensed in the year they're purchased
• They're not treated as inventory assets
• They're not included in COGS

Recording supplies in Craftybase

You have two options for tracking supplies:

Option 1: Record as purchases (recommended)

• Add the expense directly as a purchase
• This ensures the cost is excluded from COGS

Option 2: Track as non-inventoriable materials

• Create a material and mark it as non-inventoriable
• Record a material purchase
• Craftybase will automatically:
  • Assign the cost to your purchase tally
  • Exclude it from COGS

Handling packing materials

Packing materials can fall into two different categories depending on how they're used:

Shipping materials (treated as supplies)

Examples: shipping boxes, mailers, packing tape.

These should be:

• Tracked as supplies (indirect costs)
• Excluded from COGS
• Grouped using a purchase category for easier reporting

Product packaging (included in COGS)

Examples: branded boxes, sleeves, product bags.

If the packaging is part of your product's presentation, it should be:

• Treated as a material
• Included in your recipe and manufacturing process
• Counted as part of COGS

Quick reference

Need help?

For more on managing materials and costs in Craftybase, check out these articles:

• What is a non-inventoriable material?
• About materials
• What's the difference between a supply and a material?

Still have questions? Please get in touch, and we'll be happy to help.