Invoice profit

When entering invoices, the profit you have made on each invoice and invoice line is calculated. You can check this on the View Invoice screen and via the invoice profitability reports.

The profit is the difference between the cost of the line and the revenue received. It is also referred to as the Gross Margin.

Profit is calculated on a line by line basis, so profitability figures reflect line discounts, but not invoice discounts.

Note: Credit notes are not included on invoice profitability reports. This is because the cost of a credit note cannot be accurately determined.

Estimated and realised profit

Two profit values are calculated: estimated and realised.

• Estimated profit is calculated when the invoice is saved.

• Realised profit is calculated when the invoice is posted.

The estimated and realised profit will be different when the cost price of the line has changed between the invoice being saved and being posted.

Note: If the despatch method for free text items is set to Confirmation not required (Invoicing Settings), then the realised profit is calculated as soon as the invoice is saved.

When the realised profit is not calculated

The realised profit is not calculated if goods have been received but the cost price is not known. This can occur is when stock items from purchase orders have been entered as received, but the supplier's invoice has not been processed in Sage 200.

The realised profit for an invoice is adjusted when the cost price for the item is confirmed, which is i.e. when the purchase invoice is posted.

See How the cost price is calculated.

How the profit is calculated

The profit percentage is calculated using:

• The Sale value for each order line. This is the selling price multiplied by the line quantity.
• The Cost value for each line. This is the cost price multiplied by line quantity.

Not using stock? The profit is always calculated as a percentage of the revenue.

Using stock? You can choose how you want this percentage profit to be calculated (Stock Control Settings | Options tab). Choose from:

• A percentage of revenue.

  100 * (sale value - cost value) / (sale value).

• A percentage of cost.

  100 * (sale value - cost value) / (cost value).

How the cost price is calculated

Free text lines

A notional cost price can be entered with each free text line. To do this, edit the line and enter the required cost price.

This cost price is used to calculate both the estimated and realised profit.

Additional charge lines

A notional cost price can be set on each additional charge record or can be entered with each charge line. To do this, edit the line and enter required cost price.

This cost price is used to calculate both the estimated and realised profit.

Invoice items

A notional cost price can be set of each item record. This can be changed when the item is added to an invoice. To do this, edit the line and enter the required cost price.

This cost price is used to calculate both the estimated and realised profit.

Stock items

The cost price is calculated differently depending on the costing method used for the stock item.

• FIFO.

  • Estimated profit: Uses the average cost price, unless the cost price is changed on the invoice. Then the amended cost price is used.

  • Realised profit: Uses the earliest price paid for the stock items divided by the number of items.

  Example of FIFO

  1. You buy ten items at £10 each.

  2. You buy an additional five items at £15 each.

  3. You now have 15 items in stock.

  4. You sell seven items.

     The estimated unit cost is 11.67. This is the average cost price of all the items bought so far: ((10 items x £10) + (5 items x £15)) / 15.

     The realised unit cost is £10. This is earliest price paid for the goods divided by the number of goods: (7 items x £10) / 7.

  5. You sell the remaining eight items.

     The estimated unit cost is £11.67. The average cost price hasn't changed as you haven't bought any more items.

     The realised unit cost is £13.12: ((3 items x £10) + (5 items x £15)) / 8.

• Standard: The cost price specified on the stock item record.

• Average: The current average cost price.