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How to calculate profit

Even if there is no profit, that is no reason to despair and stop working

As strange as it may sound, in order to calculate the profit, we must first consider all the costs. After all, the profit may not at all be on the basis of a full cycle of business.

However, even if there is no profit, that is no reason to despair and stop working.

How many entrepreneurs say, first you feed your business, then the business begins to feed you.



To calculate profit and further to be able to put intolife right financial and management decisions, especially at the outset of activities necessary to organize a full financial accounting. It should reflect all of the amounts that you invest in the business (personal or credit facilities), the amount of revenue and shipment (if they are not the same), as well as all costs that you make, article by article (purchase of goods, lease of retail space, delivery , utility bills, etc.).


After a certain period, for example,one month of work, reduce all calculations in a single table. The first line select the proceeds for the month, in the following lines, specify all the costs of implementation. Summing up the total cost you will be able to tell the difference between revenue and expenditure, and thus count profit. However, in this report should be taken into account thatbusiness practices often have moments of a mismatch on the time of occurrence of certain liabilities and pay for them. Let's say you have products to market, or, conversely, the goods shipped and payment received for it later. In addition, a similar situation may be, and other counterparties, such as advance payments for rent or electricity. All these factors should be taken into account and prepare the report for the shipment, ie the time when the liability arose rather than when they are paid to be in front of the eyes of a pure financial picture of the month.


One can also calculate profit as a percentage of revenue. This indicator is called the cost-effectiveness, and an analysis of its changes over time helps to make better management decisions. In order to determine profitability, divide the amount of your income for the month on the amount of revenue received, and multiply the result by 100%. For different kinds of activities characteristic of its level of profitability, but on this indicator can compare your business to other similar.

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