🚨 One COGS Account per Item? A NetSuite Limitation You Need to Know Before You Buy

By Gerald “Gee” Corder | ERP Strategy & Implementation Consultant

When evaluating ERP systems, NetSuite stands tall in many areas: it's scalable, cloud-native, highly customizable, and well-integrated. But like all software platforms, it comes with certain limitations — and one of the more critical (yet often overlooked) shortcomings lies in how NetSuite handles COGS (Cost of Goods Sold) accounting.

If your business handles R&D, prototyping, engineering samples, or internal-use orders, pay close attention — this limitation may surprise you.

🔍 The Issue: One COGS Account per Item — No Exceptions

In NetSuite, the COGS account is assigned at the item record level, and that’s the only place you can set it. This means that no matter where, why, or how the item is used, NetSuite will always post its cost to the same general ledger account.

Let’s break it down with a scenario:

Imagine This:

• You manufacture a component that you sell to customers (should hit COGS – Commercial Sales)

• The same component is used for engineering prototypes (should hit COGS – Engineering)

• Or maybe you occasionally consume it for internal R&D projects (should hit R&D Expense)

In NetSuite:

Every one of those transactions will hit the same exact COGS account, even though they serve entirely different business purposes.

🆚 How Other ERP Platforms Handle This Better

Modern ERP systems like SAP Business ByDesign, Infor CloudSuite Industrial (Syteline), and Microsoft Dynamics 365 F&O allow much more transactional flexibility:

These systems allow businesses to post the same item to different COGS accounts based on:

• Sales Order Type (Commercial vs. Engineering)

• Customer Category

• Department or Project

• Warehouse Location

• Internal Use vs External Sale

🎯 Why This Matters

The inability to vary the COGS account in NetSuite can:

• Distort gross margin reporting

• Complicate R&D cost tracking

• Create audit and compliance headaches

• Lead to manual journal entries or custom scripts just to reclassify costs

For companies with engineering operations, grant-funded R&D, internal projects, or multiple cost centers, this becomes a major operational burden.

🧰 Workarounds Exist — But They're Not Simple

Yes, you can technically overcome this limitation in NetSuite — but not without complexity. The most common solutions include:

1. Custom Scripts (User Event or GL Line plug-ins)

2. Duplicating items with alternate COGS accounts (clutters your item master)

3. Manual reclass entries via saved searches and journals

4. Advanced Accounting module + Custom GL Rules (requires higher licensing tier)

These workarounds introduce:

• Higher implementation cost

• Script maintenance overhead

• Limited transparency for accounting users

🛑 Know Before You Buy

If you’re currently evaluating NetSuite and expect your business to run non-standard sales, internal consumption, or R&D operations, it’s important to weigh this limitation during your ERP selection process.

This is not a deal-breaker — but it is a deal-definer.

✅ Final Thought: Ask the Right Questions

When working with your NetSuite implementation partner, ask:

• “How will NetSuite distinguish between commercial and non-commercial sales in the GL?”

• “Can we post to alternate COGS or expense accounts based on transaction context?”

• “What scripting or modules will we need to make this work?”

Your finance and operations teams will thank you later.

Want Help Assessing Fit or Designing a Workaround?

I’ve helped clients architect solutions across NetSuite, Infor, and other platforms. If you’d like to evaluate your options or get a second opinion on your NetSuite architecture, feel free to connect. gee@ppclv.consulting.