Cleaning supplies belong in cost of goods sold, not general office expenses. Chemicals, paper products, trash bags, gloves, mop heads, and anything else consumed while delivering service is directly tied to revenue. Coding these to COGS gives you a real gross margin number instead of burying service costs in operating expenses where they distort your P&L.

For residential cleaning or small commercial operations, you can usually expense supplies as you buy them. Purchase volume is low enough that what you buy in a month roughly matches what you use. Tracking inventory on the balance sheet would cost more effort than the accuracy gains.

Commercial janitorial is different. If you run multiple crews across office buildings, medical facilities, or industrial sites, you’re buying in bulk and holding real inventory. At that scale, expensing every purchase immediately distorts your monthly margins. A big January order that lasts through April makes January look unprofitable and the other months look better than reality. The fix is periodic inventory counts. Count what’s on hand at month-end or quarter-end, value it at cost, and adjust COGS to reflect what was actually used. Quarterly counts work for most small janitorial companies if monthly feels like too much.

Tracking usage rates by product also controls costs. You can negotiate better supplier pricing when you know your real consumption, catch theft or waste, and spot when a crew is burning through chemicals faster than they should. Without inventory data, you can’t tell whether rising supply costs are driven by prices or by usage.

The bigger opportunity is allocating supply costs per contract. If you service 15 buildings, knowing your overall supply cost tells you nothing about whether each account is profitable. Medical offices, restaurants, and larger facilities consume far more supplies than a standard office. A contract that looked good at the bid can lose money once supply consumption is factored in. Even rough allocation based on square footage, visit frequency, or crew assignment beats lumping everything together. Cleaning businesses we work with in commercial and residential cleaning often find that one or two accounts are dragging down overall margins once supplies are properly assigned.

Keep equipment separate from supplies. Vacuums, floor buffers, and pressure washers get capitalized and depreciated when they exceed your threshold (usually $2,500 under de minimis safe harbor). Smaller items like buckets and hand tools can be expensed. Don’t mix equipment into consumable supplies because the accounting treatment is different and equipment costs shouldn’t flow through your monthly gross margin.

The setup is straightforward once a proper chart of accounts is built. If your current books lump all cleaning costs into one expense line, you’re flying blind on profitability. A conversation with the team at A Squared Bookkeepers in Pasadena can get the right structure in place so your financials actually show which jobs and accounts are making money.