How we Calculate Tax, Net Revenue and Gross Profit.
When creating a new item or uploading new items in a .CSV file you will be asked for a Cost Price, a Retail Price and a Tax Rate.
- The Cost Price is the net cost price and for tax and revenue calculation purposes we don't consider any tax paid in the purchase of an item.
- The Retail Price is the price that the item is sold for including tax which in the UK is VAT at 20%. This means, for example, that an item priced at £12.00 will have a price before tax is added of 12 divided by 1.2 giving a value of £10 for the item and £2 for VAT.
- We advise users to always assign a tax rate to each item, even if it is a rate of zero (it makes it easier to change the tax rate and apply it to your items if you become VAT registered). Below is an example of a Report which shows the different figures we calculate.
- 'Quantity Sold' is self explanatory and is the quantity of an item sold in a given daterange.
- 'Revenue' is the gross revenue and is calculated as the product of the 'Quantity Sold' and the 'Retail Price'.
- 'Cost' is the net cost of the item. It is treated as the cost excluding tax.
- 'Net Revenue' is calculated as the revenue generated excluding Tax (at 20% in this case) so the Net Revenue = Revenue / 1.2
- 'Tax' is the difference between the total Revenue and the Net Revenue so Tax = Revenue - Net Revenue.
- 'Gross Profit' is Net Revenue minus Cost.
- 'Gross Profit %' is the Gross Profit expressed as a percentage of the Net Revenue.
- 'Markup %' is Gross Profit expressed as a percentage of the Cost Price.
If we take the example of the Boys Bicycle above the 'Revenue' is the retail price multiplied by the quantity sold which is
£69.99 X 1 = £69.99
The 'Net Revenue' is 'Revenue' excluding 'Tax' (which is 20% in this instance) and is therefore calculated as 'Revenue' / 1.2 = £58.325 which rounds up to £58.33
The 'Tax' is the difference between the "Revenue' and the 'Net Revenue'. So that's 69.99 - 58.33 = 11.66
The 'Gross Profit' is the 'Net Revenue' minus the 'Cost Price' which is 58.33 - 38.78 = 19.56 (all tax calculations are rounded up).
The % Gross profit is 'Gross Profit' divided by 'Net Revenue' times 100 which is 19.55 / 58.33 = 33.5%
The 'Markup %' is 'Gross Profit' divided by 'Cost Price' times 100 which is 19.55 / 38.78 X 100 = 50.4%