I kind of understand how to calculate COGS. However, I don't understand how to calculate it when nothing is being created for sale. When providing a service there is nothing that we need to make to service our patients. There are no material unless this would mean the material such as needles, gauze, etc... labor (I would guess this would come from Salaries such as the our nurses, receptionist, billing person, etc.. ) and overhead (I'm not sure what is meant)?

Can someone lead me to the light

There is no COGS when you have a service company, because that's cost of GOODS SOLD. You aren't selling any goods.

However, you can have a cost of sales if you like, which is a similar sort of thing that can be used for service companies. You don't even have to do that. But you may choose to put under that category things that you consider to be more directly related to the services, versus things that are more indirectly related.

When doing a service company it's a little more difficult to look at it strictly as direct and indirect in the same manner you would a manufacturing company. After all, you are not going to count how many hours a nurse spends directly with patients or anythign like that. (Well, you can, but lots of extra work and not worth it.)

So you can look at like the nurses are cost of sales because they are working directly with patients, whereas I would count the receptionist and billing person as indirect. I think I would also count all your medical supplies as cost of sales. Office supplies I would count as indirect. Then of course there is rent if you have if, utilities, insurance and all that sort of thing - I'd count all those as indirect (overhead). Just sort of imagine what is more directly related to the patient care, versus the overall office stuff.

You don't have to call it cost of sales. I think you're a little too hung up on "book" ways of doing stuff. If you have a more creative name that sounds more appropriate, use that.

Does that kind of make sense?

This makes sense. I was about to pull my hair out behind this.

Thanks

You're welcome. :-) (Can't have you losing all your hair.)