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2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44
How to find out the net profit and understand that the business is making money.
Many entrepreneurs consider the profit of a business as cash on hand. For them, profit is the difference between how much was received and how much was left. In most cases, it is wrong to do this.
Let's look at an example. The "Romashka" store sells construction goods at retail and wholesale. The owner calculated the profit for the month:
It turned out 830 thousand rubles of loss - even if you close the business. In fact, the situation is normal, just the owner made a mistake in the calculations. Let's figure out how to calculate the profit correctly.
How to calculate net profit
The formula for calculating profit is as follows:
Net profit = revenue - operating expenses - interest on loans - depreciation - taxes.
It looks simple, but there are nuances.
Revenue
The owner of the Romashka store initially recorded three sources of revenue: money from retail customers, payment for the supply of cement, and prepayment for the supply of bricks.
Retail money and cement payments are really revenue. Customers paid, the store returned the goods. But an advance payment for a brick is no longer revenue. She will become her only when the store gives the brick to the buyer.
Entrepreneurs sometimes do not understand what revenue is. They think that this is all the money they have in their accounts. But this is only money for closed deals. The prepayment cannot be revenue because you have not yet fulfilled your obligation to the client. So far, it's just his money in your account.
Operating expenses
Operating expenses are the costs of ensuring the daily work of the company: rent, utilities, office supplies, salaries, purchase of goods.
The store owner has combined all costs, but it is more convenient to divide them into fixed and variable costs. Variables depend on revenue, constants do not.
Variable costs in "Camomile" include the purchase of goods and the salaries of sellers, who sit on a percentage of monthly revenue. We fit these two items into variable costs.
Fixed costs are rent and utilities. No matter how much the store earns, they will not change.
The lease payment, with an incorrect calculation, was 600 thousand, and became 50 thousand. Because you cannot write down the annual payment for one month, because the premises are rented for the whole year. Distribute the payment evenly over the validity period.
EBITDA is operating income. It shows whether a business can in principle make money. Positive EBITDA does not mean that the business has a net profit. You need to deduct loans, depreciation and taxes.
Interest on loans
The loan consists of the body of the loan and interest. The store "Romashka" took a million at 20% per annum for a year. As a result, you will have to pay 1, 2 million: 200 thousand will go to interest.
The body of the loan is not profit or loss. You took the money, you returned it - that's it, the story is over. But interest is a loss. You pay them for using the loan. Therefore, when calculating profit, only interest on the loan is taken into account: 200 thousand rubles per year or 16 666 rubles per month.
Depreciation
Buying equipment is an investment. You spend money on a thing that will bring you profit for some time. These costs also need to be allocated over the entire period of validity.
The owner of "Romashka" bought a forklift for the warehouse for 480 thousand rubles. Let's assume that the loader has been in operation for 10 years. This means that it will cost the owner 4,000 rubles a month. This expense is called depreciation.
Tax
Separately, you need to take into account the income tax, which depends on the tax system. The rest of the taxes paid by the business have already been taken into account: personal income tax and social contributions - in salaries, transport tax - in the price of a forklift. VAT is not taken into account at all: this is money that customers pay to the state in transit through you.
The Romashka store uses the general taxation system and pays 20% of the profits. This month, the profit amounted to 99,334 rubles. Tax - 19,867 rubles.
Net profit
We made a net profit and found out how much the business actually earned. When it was considered wrong, there was a loss of 830 thousand. In fact, the business is profitable and this month brought 79 thousand.
True, the owner of "Romashka" will not be very happy with this fact: he will still have to take somewhere 830 thousand, which he went into a minus. Knowing his real profit, he understands that the business generates income.
To calculate profit, draw up a profit and loss statement.
O&M Report Template →
To keep track of whether there is enough money in your accounts to run the business, keep a cash flow statement.
DDS report template →
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