# Managing Dropshipping (Sales-Based COGS) Learn how to setup and manage dropshipping if you are using our sales-based COGS method Written by Emily Burrows January 25, 2026 ## About If you sell through **dropshipping,** your customers place orders in your store, but the products are stored, packed, and shipped by your vendor or third-party supplier, not by you. Since these items never pass through your own warehouse, they need to be tracked differently in your books. As part of setting up your **[sales-based inventory](https://help.finaloop.com/en/articles/9419220-sales-based-cogs-everything-you-need-to-know)**, we’ll ask whether you use dropshipping. If you select **Yes**, you’ll go through a short guided setup to identify your dropshipping **warehouses**, **vendors**, and **payment terms,** so Finaloop can set up your accounting for these orders. --- ## 1. Dropshipping overview To get an overview of how we support dropshipping sales, check out this quick video: Managing your dropshipping in Finaloop with our sales-based COGS method - YouTube [Managing your dropshipping in Finaloop with our sales-based COGS method](https://www.youtube.com/watch?v=-z2cTNmDtcA) ## 2. How we determine your dropshipping treatment Based on your answers in the guided setup, we’ll automatically choose the best way to track your dropshipping orders and payments. There are two possible solutions. ### Solution 1: Based on dropshipping transactions or bills - For orders marked as dropshipping, we don’t calculate COGS at the time of the sale. - When we detect a dropshipping transaction (via a bank transaction or bill), we record it as **COGS** directly on your P&L on the date of the transaction. ### Solution 2: Based on dropshipping costs per unit Finaloop tracks your sales based on how each order is fulfilled and applies the relevant cost per unit to calculate accurate COGS. In other words, when we see an order fulfilled from your dropshipping warehouse or from a dropshipping vendor, we’ll calculate COGS using a separate dropshipping cost per unit you provide. This setup lets you: - Use **different costs per unit** for each fulfillment method. - Keep COGS most accurate and your books clean. While this method requires a bit more input in adding your additional costs per unit for the dropshipping products, it produces the most precise COGS. You can update dropshipping costs for each relevant SKU or you can update all dropshipping product costs at once using the **[Bulk Costs Edit](https://home.finaloop.com/inventory/products/costs?from=2024-01-01&to=2025-08-31)** tool. #### How to add/update your dropshipping costs per unit ##### Updating each dropshipping item separately 1. Go to **Inventory>Products.** 2. Click on the product in which you want to add dropshipping costs. 3. Click on the **Cost per unit** tab. There you can separate costs for **General** and for **Dropshipping.** 4. Click **+Add cost.** 5. Add the date from which you want to apply the dropshipping cost. 6. Add the cost per unit. 7. Click **Save.** ##### Updating dropshipping items in bulk 1. Go to **Inventory>Products.** 2. Click **Actions> Bulk cost edit.** 3. Click on the **Dropshipping** tab. 4. Under the **Average cost** column, update the relevant costs, or click **Import CSV** and follow the instructions provided. --- ## 3. Setting up dropshipping in Finaloop We'll walk you through a guided setup, asking the following questions ### 3.1. Select your dropshipping warehouses We automatically sync your warehouses from Shopify. Choose the ones used for **dropshipping fulfillment** and (not your own inventory) **.** Select all relevant warehouses. Any order marked as fulfilled in Shopify from these warehouses will be automatically treated by Finaloop as dropshipping. ### 3.2. Set your dropshipping vendor rules Next, Finaloop automatically detects vendors categorized (either by you or automatically) as **dropshipping providers**. Review the list and confirm all your dropshipping vendors are included, or add any missing vendors if needed. Once saved, Finaloop automatically classifies all transactions tied to those vendors as **Dropshipping**. ### 3.3. Clarify payment terms & bills Finally, we’ll ask about your payment terms with your vendors. Some vendors require immediate payment, while others allow you to pay some days after the order. If a vendor gives you **3 or more days** to pay, select **Yes.** If not, select **No**. If you select **Yes**, you’ll also be asked on average, how many dropshipping bills or payments do you have per month. Your answer helps us choose the dropshipping solution that best aligns your expense timing with your payment terms, while keeping your manual work to a minimum. --- ## 4. Changing your dropshipping setup If you ever want to switch between the two options, contact **Finaloop Support** via chat or email. Our team can update your configuration to match the way you manage your dropshipping operations. **Need Help?** Contact our **Support team** anytime through chat or at [support@finaloop.com](mailto:support@finaloop.com).