Bookkeeping For Laundromat: Why COGS Matter for Wash & Fold
I saw a thread on Reddit recently that made me cringe.
A laundromat owner asked a simple bookkeeping question: “My friend and I run a Wash & Fold service. Should we count tokens, detergent, and dryer sheets as Cost of Goods Sold (COGS), or just expense them?”
The top-voted answer?
“You are providing a service, not a product. There is no Cost of Goods Sold… just expense the items as materials and supplies.”
From a tax perspective, this advice is technically “fine.” The IRS doesn’t care if you put your soap costs in line 2 or line 22, as long as the net income is correct.
But from a business growth perspective, this advice is dangerous.
If you treat your direct costs (soap, water, tokens) the same way you treat your rent or internet bill, you are flying blind. You are destroying your ability to calculate Gross Margin—and without that, you can’t scale.
Here is why the “Lazy Bookkeeping” method fails, and how we handle it differently at CentsIQ.
Most inexperienced bookkeepers dump everything into one giant bucket called “Expenses.”
Rent? Expense.
Marketing? Expense.
Detergent? Expense.
Laundromat Tokens? Expense.
At the end of the month, you see:
Revenue: $10,000
Total Expenses: $8,000
Profit: $2,000
You made money. Great. But here is the problem: You don’t know why you made money.
Did you make money because your pricing is good? Or did you just get lucky because your rent is cheap? If you double your volume next month, will your profits double, or will your hidden costs eat you alive?
You can’t answer these questions because you treated Variable Costs (things that go up when you have more customers) the same as Fixed Costs (things that stay the same).
The CFO Approach: Cost of Services (COS)
At CentsIQ, we don’t just file taxes; we build financial infrastructure for decision-making. That means we separate your costs into two distinct categories:
1. Cost of Services (The “Direct” Costs)
These are costs that only happen when a customer drops off a bag of laundry.
Detergent & Softener: You don’t use these unless you have a customer.
Laundromat Tokens/Utility Allocation: The specific cost to run that machine for that load.
Labor (if variable): The team member paid specifically to fold that order.
2. Operating Expenses (The “Overhead”)
These are costs you pay whether you have 100 customers or 0.
Rent.
Insurance.
Software subscriptions.
Marketing.
Why This Matters: The Magic of “Gross Margin”
Once you separate these, you unlock the most important metric in the laundry business: Gross Margin.
Let’s look at a real-world example.
Scenario A (The Reddit Way): You charge $1.50 per pound. You look at your P&L and see a 20% net profit margin at the end of the year. You think, “Great! If I lower my price to $1.25, I can steal customers from the guy down the street and make up for it in volume!”
Scenario B (The CentsIQ Way): We look at your Cost of Services.
Revenue per lb: $1.50
(-) Soap/Supplies: $0.15
(-) Water/Utilities: $0.30
(-) Labor per lb: $0.85
= Gross Profit:$0.20 per pound
Your Gross Margin is actually razor-thin ($0.20).
If you had followed the “Lazy Advice” and lowered your price to $1.25, you would be losing money on every single bag of laundry you touched. You would have scaled yourself into bankruptcy, and your “General Expense” bucket would have hidden the problem until it was too late.
Stop Guessing. Start Structuring
The difference between a “mom and pop” shop and a scalable enterprise is data structure.
The “Reddit method” is fine if you want to stay small, pay your taxes, and hope for the best. But if you want to:
Optimize your Price Per Pound (PPL).
Know exactly how much profit a 20lb bag generates.
Expand to a second location or adding a pickup/delivery route.
You need to track Cost of Services, not just “Supplies.”
Is Your Bookkeeping Holding You Back?
If your current P&L is just a list of expenses with no Gross Margin calculation, you aren’t getting financial strategy—you’re just getting data entry.
At CentsIQ, we act as the Fractional CFO for service businesses that have outgrown “basic” bookkeeping. We don’t just track where the money went; we tell you how to make more of it.
We are selective with our clients. We work best with owners who are doing (or projected to do) $100k+ in annual revenue and are ready to use data to dominate their local market.
If that sounds like you, let’s see if we’re a fit.
