Simple Gross Profit calculation

Regularly calculating gross profit (GP%) is very important for all businesses. It is all well and good thinking you are making money because there is money in the account or in the till, but this doesn't indicate profitability. Many bills are paid in arrears, particularly VAT, wages, wage related taxes, suppliers who you have a credit period with, etc. By calculating your GP you can analyse, and project, and plan. And most importantly work out if you are actually making a profit.

All you need is do is write down your fixed costs, such as rent, insurance, and utilities for a month or a quarter. Let's say your monthly fixed costs as an example. From that you should multiple the sales for the month by the gross profit percentage (GP%) for the month that you calculate here. This will give you your actual gross profit for the month. From this, minus the wages and fixed costs. This end figure will be your net profit.

Be sure to calculate gross profit and net profit regularly. It will help to highlight if your need more promtion or events to boost sales, or whether sales prices need to rise, or if wage costs need to fall, etc