How should a warehouse or fulfillment business track inventory, labor and shipping costs?
The challenge with fulfillment operations is that you’re tracking two kinds of inventory at the same time. Your customers’ goods that you store and ship, and your own supplies like packaging, pallets, and shipping materials. Both need accurate counts but they hit your books differently.
Set up your warehouse management system to track customer-owned inventory by SKU, location, and ownership. This inventory isn’t on your balance sheet because you don’t own it, but you bill against it for storage fees, pick fees, and special handling. Cycle counts weekly or monthly catch discrepancies before they become customer complaints or shrinkage you have to absorb.
Your own supplies are a different conversation. Boxes, mailers, tape, void fill, labels, pallets, and stretch wrap should be tracked as inventory and moved to cost of goods sold as they get used. If you’re billing customers for packaging, the markup only makes sense when you know your actual per-unit cost. Most fulfillment operations underestimate supply costs because they buy in bulk and never tie usage back to specific orders or customers.
Labor is your largest variable cost and the hardest to allocate. The cleanest approach is having workers log time to activities or customers through your WMS or a time tracking tool. Receiving for Customer A, picking for Customer B, packing for Customer C. Without this breakdown, all your labor sits in one line item and you have no way to see which customers consume the most labor relative to what they pay.
Shipping is often pass-through but it’s never zero margin. You probably get carrier discounts your customers don’t, and you may bill at published rates or your discounted rates plus a handling fee. Reconcile carrier invoices weekly against what you billed customers. Lost shipments, address corrections, dimensional weight adjustments, and fuel surcharges quietly erode margin if no one is checking.
Storage costs include the obvious rent and utilities plus less obvious items like racking depreciation, forklift leases, WMS subscriptions, and insurance. Spread these across square footage or pallet positions to determine your true cost per storage unit. Then compare to what you actually charge customers per pallet or per cubic foot per month.
The endpoint is customer profitability. Pull revenue by customer (storage, pick fees, pack fees, shipping markup, special projects) and subtract direct costs (labor hours allocated, supplies consumed, shipping at your cost, storage space occupied). You’ll often find your largest customers by revenue are not your most profitable, usually because they negotiated rates years ago that no longer cover your costs. Detailed inventory accounting ties consumption back to specific jobs so this analysis actually reflects reality.
QuickBooks Online integrated with a WMS or fulfillment platform like Cin7 Core or SOS Inventory handles most of this when it’s configured correctly. Classes or projects in QuickBooks can track by customer. The work is upfront in the setup. Once it’s running, you get monthly reports that show what’s actually profitable instead of guessing. If you need help connecting the operational side to the books, that’s the kind of bookkeeping, tax and consulting services a fulfillment business benefits from most.
Trusted Accounting for Small Businesses
First Step:
Start With a Call
Tell us about your business and what you need help with. We'll ask a few questions, evaluate your current situation, and let you know how GMJ can support your books, taxes, and day-to-day operations.
More Questions
What bookkeeping problems can delay a nonprofit tax return?
The most common delays come from unreconciled bank accounts, unclear donor restrictions, missing payroll or vendor records, incomplete grant reporting, and weak functional expense coding. Each issue forces a slow rebuild of records before Form 990 can be filed.
Read answerWhat reports should an ecommerce seller review every month?
Ecommerce sellers should review channel P&L, sales by platform, gross margin, inventory value, COGS, refunds, advertising fees, cash flow, and sales tax liability every month. These reports show real profitability by channel and catch problems before they turn into cash crises.
Read answerWhat is the difference between inventory accounting and ecommerce bookkeeping?
Inventory accounting focuses on tracking stock levels, cost of goods sold, and product valuation. Ecommerce bookkeeping covers all of that plus reconciling sales channels, payment processors, fees, refunds, and sales tax.
Read answerWhat bookkeeping issues show up when a medical practice opens a second location?
Opening a second location forces you to track everything by location, allocate shared payroll and overhead correctly, match insurance deposits to the right office, and forecast cash flow for a site that will likely run at a loss for months before turning profitable.
Read answerHow should a business prepare for year-end W-2s and 1099s?
Year-end filing goes smoothly when your records are already in order. That means current W-9s on file for every contractor, accurate employee information, reconciled payroll liabilities, and clean vendor payment records.
Read answerHow should freight brokers track customer invoices and carrier payables?
Track every load with a unique load number that ties the customer invoice, carrier bill, and supporting documents together. This gives you accurate AR and AP, accounts for factoring correctly, and shows gross margin by load and by customer.
Read answer
