Understanding the Sales Category Mapping

A Sales Category is simply a classification used to identify the type of good or service associated with an item. By default, Design Manager includes categories such as Accessories, Art Works, Professional Services, and Furniture, among others.

While Sales Categories help organize items by type, their primary purpose is to determine which Sales and COGS accounts are affected when an item is sold and invoiced.

Within each Sales Category, every component type (such as Merchandise, Freight, Design Fees, Installation/Labor, etc.) can be mapped to specific Sales and COGS accounts.

For example, if we open the Accessories Sales Category, we can see the account mapping assigned to each component type. These mappings determine where revenue and costs are recorded when an item is invoiced.

Suppose an item contains the following components and pricing:

If the Accessories Sales Category is configured as shown in the example above:

In other words, the price invoiced to the client for each component determines the amount of revenue recorded in the corresponding Sales account.

While Sales accounts track revenue, COGS accounts track the actual costs associated with the items being sold.

Using the previous example, if the Merchandise component is sold to the client for $50 and cost $30, the $30 cost would be recorded in the appropriate COGS account when the item is invoiced.

The Sales Category determines both:

Important: The Estimated Cost displayed on the item does not represent the actual cost that will be recorded in COGS. It is only an estimate that can be displayed on purchase orders.

The actual costs used for COGS are captured through the Vendor Bills and Invoices process. To learn more about recording vendor invoices, please refer to the related article on Vendor Bills and Invoices.

The accessory item below contains the following components:

After recording the vendor bill for this item's purchase order, the costs entered on that bill become the amounts that will eventually be transferred from Work in Process (WIP) to COGS when the client invoice is posted.

Once the item has been invoiced to the client, you can review the accounting impact by running the Sales Journal Report using the Invoice Number with Account Detail format.

This report allows you to see:

Revenue is recognized in the fiscal month of the posted client invoice. This same posting process also converts any applicable Work in Process (WIP) balances into Cost of Goods Sold (COGS).
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​Important: Bypass WIP is a setting within Design Manager that bypasses the normal Work in Process (WIP) workflow and records costs directly to the applicable Cost of Goods Sold (COGS) accounts when a vendor bill is posted. While this setting is not commonly used, organizations that have it enabled may notice that COGS is incurred at the time the vendor bill is recorded rather than when the item is invoiced to the client.

At that point, the accounting lifecycle of the item is generally complete within Design Manager.

You may have noticed that some Sales Category account mappings are set to Company Default. These default accounts can be found under Settings > Accounting Settings > Accounts.

The Company Default accounts serve as the system-wide fallback accounts used when:

When a component within a Sales Category is set to Company Default, Design Manager will use the current account configuration from the Accounting Settings > Accounts window. This means that any future changes made to the Company Default accounts will automatically be reflected in all Sales Categories that reference them.

If you are unfamiliar with advanced accounting practices, it is recommended that you leave these account settings unchanged. Incorrect account mappings can cause revenue, costs, and other financial activity to be recorded in the wrong General Ledger accounts, resulting in inaccurate financial reporting.

As mentioned above, Design Manager can also use the Company Default accounts when an item does not have a Sales Category assigned. This functionality is available only to firms using Design Manager Pro Cloud.

If you have questions about Sales Categories or concerns regarding your account mappings, this guide should help clarify how Sales and COGS are determined. If you need further assistance, our Support Team can be reached at support@designmanager.com.