I need help understanding why my monthly financial shows COGS like $2k for $400k in sales. I know in the month I am looking at there were a lot of inventory transfers; would that have affected the COGS line on the income statement? ( I am an ops guy, not accountant 🙂 )

Check the timing of Item Fulfilments (COGS) and Invoicing (Sales).

Without looking I believe the transfers were done and then invoiced at the same time, or very close. Can you explain how that would affect COGS on the income statement and be understated in a big way?

When a Sales Order is Fulfilled, the Item Fulfilment transaction is the event that creates the COGS posting. When the Invoice posts, that will post the revenue. So if the IF was done in October and the Invoicing was done in November then that would make such an impact as you describe. BUT in this case, I think we should look more by what you mean by "transfers' are done. What transfer and what type of transaction? Is this a new issue?

Ok, so I think this is the root cause but I don't know how to go about fixing it. There were a lot of inventory adjustments done in Sept. I believe it was done before the actual PO was received; and then an adjustment was made to correct it once the PO was received in the system. Could the timing of these mess things up?

The timing could have an impact if the item was Fulfilled at the time is had a $0 cost. Probably we cannot specifically fix your issue here. I would suggest just analysing 1-2 sales orders with 1-2 items. have a look at the flow and check the GL posting for each transaction in the process.

Thank you!