When it comes to the latest report for March 2026 manufactured goods orders, according to the United States Census Bureau’s May 4 report, the government agency reported a 1.5 percent bump in orders for the nation’s manufacturers, growing to $630.4 billion. Understanding concepts like Cost of Goods Manufactured (COGM) is essential to smooth operations.
The cost of goods manufactured (COGM) reflects the total manufacturing costs a company incurs during a particular accounting period to complete goods. It includes direct materials used, direct labor, and manufacturing overhead. COGM helps businesses manage inventory levels and serves as a key input for calculating the cost of goods sold (COGS) reported on the income statement.
The first step is to analyze how each input contributes to the result. This involves reviewing direct materials, direct labor, and overhead to determine the complete production costs for the accounting period. By evaluating each component’s contribution, companies can better project manufacturing capacity and cost-effectiveness.
Direct Materials Used in Production
Direct Materials Used = Beginning Raw Materials Inventory + Purchase of Raw Materials – Ending Raw Materials Inventory
This amount is then incorporated into the Total Manufacturing Costs (and ultimately the WIP inventory) shown above.
Calculating Direct Labor and Manufacturing Overhead:
Direct labor costs are determined from time logs or clock-ins (hours worked × hourly rate). Manufacturing overhead includes indirect production costs such as factory utilities, depreciation, and supervision.
Translating COGM to Cost of Goods Sold:
Once calculated, COGM is transferred to the Finished Goods Inventory account. Finished Goods Inventory consists of completed products ready for sale to customers. The standard relationship is:
COGM shows whether production costs are too high or too low relative to sales. For example, if one business generates $2,000,000 in revenue with $1,500,000 in COGS (25% gross margin), while another has $1,500,000 in revenue but only $750,000 in COGS (50% gross margin), the second company demonstrates stronger profitability.
Understanding COGM enables businesses to optimize costs related to labor, overhead, and materials, ultimately improving net income and operational efficiency. When calculating and reporting COGM, it is essential for businesses to apply these concepts accurately in their accounting and bookkeeping practices.
Understanding Cost of Goods Manufactured
June 1, 2026 · Accounting News, Blog, Uncategorized
⏱ 3 min read
When it comes to the latest report for March 2026 manufactured goods orders, according to the United States Census Bureau’s May 4 report, the government agency reported a 1.5 percent bump in orders for the nation’s manufacturers, growing to $630.4 billion. Understanding concepts like Cost of Goods Manufactured (COGM) is essential to smooth operations.
The cost of goods manufactured (COGM) reflects the total manufacturing costs a company incurs during a particular accounting period to complete goods. It includes direct materials used, direct labor, and manufacturing overhead. COGM helps businesses manage inventory levels and serves as a key input for calculating the cost of goods sold (COGS) reported on the income statement.
The first step is to analyze how each input contributes to the result. This involves reviewing direct materials, direct labor, and overhead to determine the complete production costs for the accounting period. By evaluating each component’s contribution, companies can better project manufacturing capacity and cost-effectiveness.
Direct Materials Used in Production
Direct Materials Used = Beginning Raw Materials Inventory + Purchase of Raw Materials – Ending Raw Materials Inventory
This amount is then incorporated into the Total Manufacturing Costs (and ultimately the WIP inventory) shown above.
Calculating Direct Labor and Manufacturing Overhead:
Direct labor costs are determined from time logs or clock-ins (hours worked × hourly rate). Manufacturing overhead includes indirect production costs such as factory utilities, depreciation, and supervision.
Translating COGM to Cost of Goods Sold:
Once calculated, COGM is transferred to the Finished Goods Inventory account. Finished Goods Inventory consists of completed products ready for sale to customers. The standard relationship is:
COGM shows whether production costs are too high or too low relative to sales. For example, if one business generates $2,000,000 in revenue with $1,500,000 in COGS (25% gross margin), while another has $1,500,000 in revenue but only $750,000 in COGS (50% gross margin), the second company demonstrates stronger profitability.
Understanding COGM enables businesses to optimize costs related to labor, overhead, and materials, ultimately improving net income and operational efficiency. When calculating and reporting COGM, it is essential for businesses to apply these concepts accurately in their accounting and bookkeeping practices.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
S.98: Rural Broadband Protection Act of 2025 – This bipartisan bill instructs the Federal Communications Commission (FCC) to establish a vetting process for service provider applicants applying for federal funding assistance for broadband deployment in high-cost areas, including rural communities. Sponsored by Sen. Shelley Moore Capito (R-WV) on Jan. 15, 2025, the bill passed in the Senate on June 26, 2025, and in the House on April 20, 2025. It was signed into law by the president on May 11, 2026.
S.723: Tribal Trust Land Homeownership Act of 2025 – Introduced by Sen. John Thune (R-SD) on Feb. 25, 2025, this bill requires the Bureau of Indian Affairs to complete the processing of all residential and business mortgages on Indian land by certain deadlines. It passed in the Senate on Dec. 11, 2025, in the House on March 4, and was enacted on May 4.
A joint resolution to direct the removal of United States Armed Forces from hostilities within or against the Islamic Republic of Iran that have not been authorized by Congress (SJ Res 185) – Well past the 60-day deadline for a president to legally engage in military hostilities abroad without congressional authorization, Sen. Tim Kaine (D-VA) introduced his resolution on April 27. The resolution would remove U.S. military troops from Iran unless explicitly authorized by Congress. On May 19, the resolution narrowly passed in the Senate Foreign Relations Committee, now moving to the Senate floor for debate and a full vote. The resolution faces an uphill battle in the House. However, even if the joint resolution cleared the Senate and the House, it is expected to be vetoed by the president and would require a two-thirds supermajority by both the Senate and the House to override the veto – which is unlikely at this point.
21st Century ROAD to Housing Act (HR 6644) – This bipartisan, White House-endorsed bill addresses housing affordability by placing ownership restrictions on large institutional investors and expanding available financing for homebuyers. One provision would prohibit institutional investors/private equity firms that own more than 350 single-family homes from purchasing additional single-family homes – unless they are sold to individual homeowners after seven years. The act would impose a penalty of up to $1 million per violation or three times the purchase price of the property, whichever is greater. Other provisions waive regulations on community banks to help expand local lending. The bill was introduced by Rep. French Hill (R-AR) on Dec. 11, 2025. It passed in the House on Feb. 9, in the Senate with changes on March 12, and in the House again with changes on May 20. The bill is currently under consideration in the Senate for the second time.
Advancing Broadband, Tribal Land Mortgages and Affordable Single-Owner Housing Opportunities
June 1, 2026 · Blog, Congress at Work, Uncategorized
⏱ 3 min read
S.98: Rural Broadband Protection Act of 2025 – This bipartisan bill instructs the Federal Communications Commission (FCC) to establish a vetting process for service provider applicants applying for federal funding assistance for broadband deployment in high-cost areas, including rural communities. Sponsored by Sen. Shelley Moore Capito (R-WV) on Jan. 15, 2025, the bill passed in the Senate on June 26, 2025, and in the House on April 20, 2025. It was signed into law by the president on May 11, 2026.
S.723: Tribal Trust Land Homeownership Act of 2025 – Introduced by Sen. John Thune (R-SD) on Feb. 25, 2025, this bill requires the Bureau of Indian Affairs to complete the processing of all residential and business mortgages on Indian land by certain deadlines. It passed in the Senate on Dec. 11, 2025, in the House on March 4, and was enacted on May 4.
A joint resolution to direct the removal of United States Armed Forces from hostilities within or against the Islamic Republic of Iran that have not been authorized by Congress (SJ Res 185) – Well past the 60-day deadline for a president to legally engage in military hostilities abroad without congressional authorization, Sen. Tim Kaine (D-VA) introduced his resolution on April 27. The resolution would remove U.S. military troops from Iran unless explicitly authorized by Congress. On May 19, the resolution narrowly passed in the Senate Foreign Relations Committee, now moving to the Senate floor for debate and a full vote. The resolution faces an uphill battle in the House. However, even if the joint resolution cleared the Senate and the House, it is expected to be vetoed by the president and would require a two-thirds supermajority by both the Senate and the House to override the veto – which is unlikely at this point.
21st Century ROAD to Housing Act (HR 6644) – This bipartisan, White House-endorsed bill addresses housing affordability by placing ownership restrictions on large institutional investors and expanding available financing for homebuyers. One provision would prohibit institutional investors/private equity firms that own more than 350 single-family homes from purchasing additional single-family homes – unless they are sold to individual homeowners after seven years. The act would impose a penalty of up to $1 million per violation or three times the purchase price of the property, whichever is greater. Other provisions waive regulations on community banks to help expand local lending. The bill was introduced by Rep. French Hill (R-AR) on Dec. 11, 2025. It passed in the House on Feb. 9, in the Senate with changes on March 12, and in the House again with changes on May 20. The bill is currently under consideration in the Senate for the second time.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Every day, businesses are publishing AI-generated blog posts, automated emails, faceless videos, and social media threads at an unprecedented scale. A prompt can now produce what once required hours of brainstorming and execution.
This probably sounds like every marketer’s dream. However, audiences are becoming more selective, more skeptical, and more emotionally disconnected from brands that sound robotic or overly automated.
This also has made human connection more valuable. The businesses winning today are not those creating the most content, but those creating the content that feels real, personal, trustworthy, and emotionally intelligent. In a world flooded with AI-generated noise, human-centric marketing has become a competitive advantage.
The Internet Has Entered the Era of AI Saturation
AI tools have completely transformed marketing. Businesses now use AI to write ads, generate videos, automate customer support, create product descriptions, analyze customer behavior, and schedule content.
According to recent industry research, generative AI adoption among marketing teams has exploded due to the efficiency and ROI it promises. However, in the pursuit of efficiency, many businesses are optimizing for systems and not people, running the risk of marketing to search engines and not the humans who are typing keywords into them.
Consumers are increasingly noticing that a lot of the content feels emotionally flat, repetitive, or lifeless. As a result, consumers are becoming fatigued with overly polished, mass-produced AI content.
In many ways, AI has lowered the barrier to creating content – while at the same time raising the standard for creating meaningful content. Today, audiences are not looking for more information. They want resonance, relatability, trust, and emotional connection.
The Anatomy of AI Spam: The ‘More is Better’ Illusion
In the early 2020s, the marketing playbook was all about using AI to multiply production, lower cost per asset, and dominate search engines and social feeds through volume.
This resulted in companies adopting generative AI to scale up their monthly content output. But this push for volume has triggered an aggressive case of digital fatigue. Audiences are learning to spot signs of automated copies, such as repetitive sentence structures, unnatural personalization, generic advice, lack of original insight, and emotionally detached messages.
AI spam also suffers from algorithmic sameness as AI models train on identical and widely available data. Unless carefully refined with brand-specific insights and human creativity, many outputs begin sounding identical. This lazy automation has broken consumer trust.
The Hybrid Framework
Choosing human-centric marketing does not mean launching an anti-technology crusade or abandoning modern software tools. The smartest marketing strategies today combine AI efficiency with human intelligence. A marketing team can use generative tools to manage backend activities like sorting data, testing headlines, generating first drafts and automating repetitive workflows.
With the administrative friction taken care of, the marketing team will have time to listen closely to its audience, understand emotional context, tell compelling stories and build authentic trust. Technology in this case will drive distribution scale, while genuine human connection drives sales conversations.
How to Make Your Marketing More Human-Centric
As AI-generated content becomes more common, standing out will require marketers to become more intentional about human connections. Here are practical ways to make marketing feel more authentic and emotionally relevant:
Share real experiences – talk about lessons learned, mistakes made, challenges faced and real outcomes. These experiences cannot be automated convincingly.
Develop audience clarity – understanding not just who your audience is, but what they fear, desire, struggle with and aspire toward.
Human language and storytelling – avoid sounding overly corporate, robotic or excessively optimized. People connect with conversational communication, relatable stories and emotional honesty.
Build around emotion, not features – focus on how customers want to feel, such as confident, respected, productive, safe or inspired.
Show the humans behind the brand – feature team members, founders, behind-the-scenes moments, customer stories and authentic interactions.
Focus on conversations, not broadcasting – respond thoughtfully to comments, engage in discussions and listen to feedback.
Prioritize original thinking – a major weakness with AI-generated content is sameness. Sharing unique opinions, fresh insights and real expertise instead of recycling popular talking points helps a business stand out.
Use AI as an assistant, not a replacement – AI should support human creativity and not replace the human voice entirely. Every outbound message should pass a simple test before it is sent: Would a real, informed person who actually cares about this customer send this message? If the answer is no, the message should not be sent.
Final Thoughts
Human-centric marketing focuses heavily on real customer experience, emotional understanding, and authentic communication. Brands that want to remain successful must continue investing time and energy in understanding real human behavior, emotion, and trust.
Why Human-Centric Marketing Beats AI Spam Every Time
June 1, 2026 · Blog, Uncategorized, What's New in Technology
⏱ 4 min read
Every day, businesses are publishing AI-generated blog posts, automated emails, faceless videos, and social media threads at an unprecedented scale. A prompt can now produce what once required hours of brainstorming and execution.
This probably sounds like every marketer’s dream. However, audiences are becoming more selective, more skeptical, and more emotionally disconnected from brands that sound robotic or overly automated.
This also has made human connection more valuable. The businesses winning today are not those creating the most content, but those creating the content that feels real, personal, trustworthy, and emotionally intelligent. In a world flooded with AI-generated noise, human-centric marketing has become a competitive advantage.
The Internet Has Entered the Era of AI Saturation
AI tools have completely transformed marketing. Businesses now use AI to write ads, generate videos, automate customer support, create product descriptions, analyze customer behavior, and schedule content.
According to recent industry research, generative AI adoption among marketing teams has exploded due to the efficiency and ROI it promises. However, in the pursuit of efficiency, many businesses are optimizing for systems and not people, running the risk of marketing to search engines and not the humans who are typing keywords into them.
Consumers are increasingly noticing that a lot of the content feels emotionally flat, repetitive, or lifeless. As a result, consumers are becoming fatigued with overly polished, mass-produced AI content.
In many ways, AI has lowered the barrier to creating content – while at the same time raising the standard for creating meaningful content. Today, audiences are not looking for more information. They want resonance, relatability, trust, and emotional connection.
The Anatomy of AI Spam: The ‘More is Better’ Illusion
In the early 2020s, the marketing playbook was all about using AI to multiply production, lower cost per asset, and dominate search engines and social feeds through volume.
This resulted in companies adopting generative AI to scale up their monthly content output. But this push for volume has triggered an aggressive case of digital fatigue. Audiences are learning to spot signs of automated copies, such as repetitive sentence structures, unnatural personalization, generic advice, lack of original insight, and emotionally detached messages.
AI spam also suffers from algorithmic sameness as AI models train on identical and widely available data. Unless carefully refined with brand-specific insights and human creativity, many outputs begin sounding identical. This lazy automation has broken consumer trust.
The Hybrid Framework
Choosing human-centric marketing does not mean launching an anti-technology crusade or abandoning modern software tools. The smartest marketing strategies today combine AI efficiency with human intelligence. A marketing team can use generative tools to manage backend activities like sorting data, testing headlines, generating first drafts and automating repetitive workflows.
With the administrative friction taken care of, the marketing team will have time to listen closely to its audience, understand emotional context, tell compelling stories and build authentic trust. Technology in this case will drive distribution scale, while genuine human connection drives sales conversations.
How to Make Your Marketing More Human-Centric
As AI-generated content becomes more common, standing out will require marketers to become more intentional about human connections. Here are practical ways to make marketing feel more authentic and emotionally relevant:
Share real experiences – talk about lessons learned, mistakes made, challenges faced and real outcomes. These experiences cannot be automated convincingly.
Develop audience clarity – understanding not just who your audience is, but what they fear, desire, struggle with and aspire toward.
Human language and storytelling – avoid sounding overly corporate, robotic or excessively optimized. People connect with conversational communication, relatable stories and emotional honesty.
Build around emotion, not features – focus on how customers want to feel, such as confident, respected, productive, safe or inspired.
Show the humans behind the brand – feature team members, founders, behind-the-scenes moments, customer stories and authentic interactions.
Focus on conversations, not broadcasting – respond thoughtfully to comments, engage in discussions and listen to feedback.
Prioritize original thinking – a major weakness with AI-generated content is sameness. Sharing unique opinions, fresh insights and real expertise instead of recycling popular talking points helps a business stand out.
Use AI as an assistant, not a replacement – AI should support human creativity and not replace the human voice entirely. Every outbound message should pass a simple test before it is sent: Would a real, informed person who actually cares about this customer send this message? If the answer is no, the message should not be sent.
Final Thoughts
Human-centric marketing focuses heavily on real customer experience, emotional understanding, and authentic communication. Brands that want to remain successful must continue investing time and energy in understanding real human behavior, emotion, and trust.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Artificial intelligence is driving an unprecedented surge in data center construction. Developers, private equity sponsors and their tax advisors are navigating a complicated web of questions that touch everything from ownership structure to site selection to power sourcing. Get the early decisions wrong and the tax consequences can follow a project for years.
Why REITs Have Become the Structure of Choice
Private equity has increasingly turned to real estate investment trusts when backing data center projects. Structure a REIT correctly, and you sidestep corporate-level taxation entirely. Foreign investors get an even better deal. Sovereign wealth funds and foreign pension funds can participate without any obligation to file U.S. tax returns. Data centers, with their heavy real estate footprint, slot into the REIT framework more naturally than many other asset classes.
That said, the fit is not seamless. Related party rent rules create traps for the unwary. Public pension funds and sovereign wealth funds need to confirm they do not hold stakes in both a data center REIT and its tenant. Another wrinkle involves equipment. Data centers demand significant upfront investment in personal property that may not count as qualifying REIT assets. The tax code requires that 75 percent of a REIT’s total asset value consist of real estate, cash, and government securities at each quarter’s close. Developers often must segregate personal property until the REIT builds up enough good assets to clear that hurdle.
The Power and Water Challenge
Reliable power and water access have become one of the toughest operational problems in the industry. Demand is so intense that many developers are generating their own electricity on-site. The tax treatment of these co-located power facilities depends heavily on the energy source and delivery method. Get it wrong, and the generation asset may not qualify for REIT treatment.
Solar photovoltaic systems sit on relatively solid ground under existing guidance. Nuclear and natural gas, which many see as the next wave of data center power, do not. Current rules leave significant uncertainty around whether these sources can work within a REIT structure.
Legislative and Executive Developments
The IRS priority guidance plan for 2025 and 2026 contains no projects aimed squarely at data centers. Regulation section 1.856-10(g), finalized in 2016, includes an example analyzing customized electrical and telecommunications systems in a data center context, but practitioners continue pushing for clearer rules on alternative energy.
Congress may offer relief on the waterfront. In April 2025, Representative Darin LaHood of Illinois proposed a new section 48F that would provide a 30 percent credit for qualifying water reuse projects, including on-site recycling systems at data centers. With U.S. data centers projected to consume 33 billion gallons of water by 2028, the bill attracted 21 cosponsors and bipartisan support.
The White House has made its priorities clear as well. The Trump administration’s July 2025 AI action plan established a goal of achieving global dominance in artificial intelligence, with infrastructure as one of three pillars. An executive order, issued July 23, 2025, focused specifically on reducing federal regulatory obstacles to data center construction.
Conclusion and OBBBA Incentives Worth Watching
Several provisions in the One Big Beautiful Bill Act benefit data center projects, even though lawmakers did not design them with that sector in mind. The return of 100 percent bonus depreciation under section 168(k) matters enormously for an industry requiring massive capital outlays.
Rural Opportunity Zones sweeten the economics further. Investments in qualified rural opportunity funds now qualify for a 30 percent basis step-up after five years, triple the 10 percent available in standard zones. A special rule targeting improvements to existing structures in rural areas cuts the substantial improvement threshold to 50 percent of adjusted basis, compared to more than 100 percent for non-rural funds.
Developers and investors evaluating new projects will find that entity structure, site selection, and the shifting regulatory environment all interact in ways that directly affect the bottom line. Getting the tax picture right from the start remains essential.
Tax Considerations for Data Center Projects in the Age of AI
May 1, 2026 · Blog, Tax and Financial News, Uncategorized
⏱ 4 min read
Artificial intelligence is driving an unprecedented surge in data center construction. Developers, private equity sponsors and their tax advisors are navigating a complicated web of questions that touch everything from ownership structure to site selection to power sourcing. Get the early decisions wrong and the tax consequences can follow a project for years.
Why REITs Have Become the Structure of Choice
Private equity has increasingly turned to real estate investment trusts when backing data center projects. Structure a REIT correctly, and you sidestep corporate-level taxation entirely. Foreign investors get an even better deal. Sovereign wealth funds and foreign pension funds can participate without any obligation to file U.S. tax returns. Data centers, with their heavy real estate footprint, slot into the REIT framework more naturally than many other asset classes.
That said, the fit is not seamless. Related party rent rules create traps for the unwary. Public pension funds and sovereign wealth funds need to confirm they do not hold stakes in both a data center REIT and its tenant. Another wrinkle involves equipment. Data centers demand significant upfront investment in personal property that may not count as qualifying REIT assets. The tax code requires that 75 percent of a REIT’s total asset value consist of real estate, cash, and government securities at each quarter’s close. Developers often must segregate personal property until the REIT builds up enough good assets to clear that hurdle.
The Power and Water Challenge
Reliable power and water access have become one of the toughest operational problems in the industry. Demand is so intense that many developers are generating their own electricity on-site. The tax treatment of these co-located power facilities depends heavily on the energy source and delivery method. Get it wrong, and the generation asset may not qualify for REIT treatment.
Solar photovoltaic systems sit on relatively solid ground under existing guidance. Nuclear and natural gas, which many see as the next wave of data center power, do not. Current rules leave significant uncertainty around whether these sources can work within a REIT structure.
Legislative and Executive Developments
The IRS priority guidance plan for 2025 and 2026 contains no projects aimed squarely at data centers. Regulation section 1.856-10(g), finalized in 2016, includes an example analyzing customized electrical and telecommunications systems in a data center context, but practitioners continue pushing for clearer rules on alternative energy.
Congress may offer relief on the waterfront. In April 2025, Representative Darin LaHood of Illinois proposed a new section 48F that would provide a 30 percent credit for qualifying water reuse projects, including on-site recycling systems at data centers. With U.S. data centers projected to consume 33 billion gallons of water by 2028, the bill attracted 21 cosponsors and bipartisan support.
The White House has made its priorities clear as well. The Trump administration’s July 2025 AI action plan established a goal of achieving global dominance in artificial intelligence, with infrastructure as one of three pillars. An executive order, issued July 23, 2025, focused specifically on reducing federal regulatory obstacles to data center construction.
Conclusion and OBBBA Incentives Worth Watching
Several provisions in the One Big Beautiful Bill Act benefit data center projects, even though lawmakers did not design them with that sector in mind. The return of 100 percent bonus depreciation under section 168(k) matters enormously for an industry requiring massive capital outlays.
Rural Opportunity Zones sweeten the economics further. Investments in qualified rural opportunity funds now qualify for a 30 percent basis step-up after five years, triple the 10 percent available in standard zones. A special rule targeting improvements to existing structures in rural areas cuts the substantial improvement threshold to 50 percent of adjusted basis, compared to more than 100 percent for non-rural funds.
Developers and investors evaluating new projects will find that entity structure, site selection, and the shifting regulatory environment all interact in ways that directly affect the bottom line. Getting the tax picture right from the start remains essential.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
The Customer Acquisition Cost (CAC) measures how much a company spends to obtain new, additional customers. Oftentimes, it’s used with the customer lifetime value (LTV) metric, which also projects the customer’s profitability to calculate the newly acquired customer’s value.
It’s primarily used to measure a business’ sales and marketing departments to figure out their profitability, profit margin and return on investment figures.
How to Calculate
CAC = Sales and Marketing Expense/Number of New Customers
Where: Examples of the expenses include product and service promotion expenditures, special compensation and commissions, regular wage payments, and operating expenses.
The tally of newly acquired customers is simply how many new, unique contracts the business acquired. It’s important to keep the expenses and customer acquisition numbers consistent over the same periods.
Why It’s Important
Business owners and their managers, along with investors, can look at sales and marketing efforts from a return on investment on their expenditures and outcomes. For example, there could be multiple channels that sales and marketing utilize to obtain new customers over a quarter, half-year, or 12-month period (such as email marketing, social media marketing, conferences, etc.). Based upon each channel, the customer acquisition cost is determined by dividing the financial outlay per customer acquired.
From there, each channel can be analyzed to see which one works well and, equally important, which ones don’t work well and either need to be discontinued or modified. Internal stakeholders and external investors (both existing and potential) can look at trends to see if existing management is productive or needs to be replaced with more competent individuals.
Accounting Considerations
Based on FASB’s Accounting Standards Codification 340-40, businesses are required to document and capitalize incremental costs of securing new customer business if the related expenses are projected to be recouped.
An incremental cost in the scope of obtaining a contract is a cost an entity incurs to obtain a contract that wouldn’t have been incurred if the contract hadn’t been obtained.
While a sales commission (be it fixed or a percentage of a new contract) may be considered an eligible incremental cost to one of its employees, it’s not necessarily always the case. Rather, the true test of whether an incremental cost is capitalizable depends on the subjective interpretation of whether a mandated financial expenditure for an incremental cost is attributed to signing a contract with a new customer.
The following sample situations often require more investigation to determine whether the capitalization of costs is applicable:
Equity issuances based upon meeting production and essential function goals
Employee compensation according to previous years’ executed contracts
Sales commissions allocated over multiple time frames and/or to more than one employee for a single contract.
ASC 340-40 also stipulates the amortization schedule of capitalization costs of obtaining a customer contract on a scheduled timeline that follows the delivery to the customer of the contracted goods or services.
Conclusion
While the customer acquisition cost may be straightforward, when it comes to subjective cases, businesses that have experience with murkier situations are able to make the most of their subjective sales and marketing expenses when navigating the tax and accounting landscape.
Understanding the Customer Acquisition Cost
May 1, 2026 · Accounting News, Blog, Uncategorized
⏱ 3 min read
The Customer Acquisition Cost (CAC) measures how much a company spends to obtain new, additional customers. Oftentimes, it’s used with the customer lifetime value (LTV) metric, which also projects the customer’s profitability to calculate the newly acquired customer’s value.
It’s primarily used to measure a business’ sales and marketing departments to figure out their profitability, profit margin and return on investment figures.
How to Calculate
CAC = Sales and Marketing Expense/Number of New Customers
Where: Examples of the expenses include product and service promotion expenditures, special compensation and commissions, regular wage payments, and operating expenses.
The tally of newly acquired customers is simply how many new, unique contracts the business acquired. It’s important to keep the expenses and customer acquisition numbers consistent over the same periods.
Why It’s Important
Business owners and their managers, along with investors, can look at sales and marketing efforts from a return on investment on their expenditures and outcomes. For example, there could be multiple channels that sales and marketing utilize to obtain new customers over a quarter, half-year, or 12-month period (such as email marketing, social media marketing, conferences, etc.). Based upon each channel, the customer acquisition cost is determined by dividing the financial outlay per customer acquired.
From there, each channel can be analyzed to see which one works well and, equally important, which ones don’t work well and either need to be discontinued or modified. Internal stakeholders and external investors (both existing and potential) can look at trends to see if existing management is productive or needs to be replaced with more competent individuals.
Accounting Considerations
Based on FASB’s Accounting Standards Codification 340-40, businesses are required to document and capitalize incremental costs of securing new customer business if the related expenses are projected to be recouped.
An incremental cost in the scope of obtaining a contract is a cost an entity incurs to obtain a contract that wouldn’t have been incurred if the contract hadn’t been obtained.
While a sales commission (be it fixed or a percentage of a new contract) may be considered an eligible incremental cost to one of its employees, it’s not necessarily always the case. Rather, the true test of whether an incremental cost is capitalizable depends on the subjective interpretation of whether a mandated financial expenditure for an incremental cost is attributed to signing a contract with a new customer.
The following sample situations often require more investigation to determine whether the capitalization of costs is applicable:
Equity issuances based upon meeting production and essential function goals
Employee compensation according to previous years’ executed contracts
Sales commissions allocated over multiple time frames and/or to more than one employee for a single contract.
ASC 340-40 also stipulates the amortization schedule of capitalization costs of obtaining a customer contract on a scheduled timeline that follows the delivery to the customer of the contracted goods or services.
Conclusion
While the customer acquisition cost may be straightforward, when it comes to subjective cases, businesses that have experience with murkier situations are able to make the most of their subjective sales and marketing expenses when navigating the tax and accounting landscape.
Disclaimer
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When it comes to the latest report for March 2026 manufactured goods orders, according to the United States Census Bureau’s May 4 report, the government agency reported a 1.5 percent bump in orders for the nation’s manufacturers, growing to $630.4 billion. Understanding concepts like Cost of Goods Manufactured (COGM) is essential to smooth operations.
S.98: Rural Broadband Protection Act of 2025 – This bipartisan bill instructs the Federal Communications Commission (FCC) to establish a vetting process for service provider applicants applying for federal funding assistance for broadband deployment in high-cost areas, including rural communities. Sponsored by Sen. Shelley Moore Capito (R-WV) on Jan. 15, 2025, the bill passed in the Senate on June 26, 2025, and in the House on April 20, 2025. It was signed into law by the president on May 11, 2026.
Every day, businesses are publishing AI-generated blog posts, automated emails, faceless videos, and social media threads at an unprecedented scale. A prompt can now produce what once required hours of brainstorming and execution.
Artificial intelligence is driving an unprecedented surge in data center construction. Developers, private equity sponsors and their tax advisors are navigating a complicated web of questions that touch everything from ownership structure to site selection to power sourcing. Get the early decisions wrong and the tax consequences can follow a project for years.
The Customer Acquisition Cost (CAC) measures how much a company spends to obtain new, additional customers. Oftentimes, it’s used with the customer lifetime value (LTV) metric, which also projects the customer’s profitability to calculate the newly acquired customer’s value.