Sales order profit

When entering quotations, pro formas and sales orders, you can view the sales profit for the whole order and for each order line.

Note: Profitability is calculated on a line by line basis. For this reason, profitability figures reflect line discounts, but not order or invoice discounts.

Two profit values are calculated for sales orders - estimated and realised.

On quotations and pro formas invoices, you can only view the estimated profit. On sales orders you can view the estimated and realised profit.

Estimated profit

Estimated profits are calculated when a sales order, quotation, or pro forma is entered.

The following cost prices are used to calculate estimated profit:

• For stock items using the Standard costing method The costing method is used to calculate the cost of sales of your stock items, the value of stock, and the transactions posted to your stock nominal accounts. There are four available costing methods. The costing method is specified for each product group., this is the standard cost price.

• For stock items using the FIFO, Average or Actual costing methods, this is the current average buying price The average buying price is updated each time goods are confirmed as received with a known cost price. The average buying price is calculated in the following way: (price paid for goods in stock)/(the number of goods in stock).

• For sales orders only: If you have the correct user permissions, you can change the cost price on the sales order. This amended cost price is only used to calculate the estimated profit.

Realised profit

The current cost price of an item is used to calculate realised profit. This cost price depends on the costing method The costing method is used to calculate the cost of sales of your stock items, the value of stock, and the transactions posted to your stock nominal accounts. There are four available costing methods. The costing method is specified for each product group. used for each item.

Realised profits are calculated either when the goods are despatched, or when the invoice is posted. This depends on the options you have chosen in the SOP settings.

Note: Returns and credit notes are not included on sales order or invoice profitability reports.

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, 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.

You decide how you want this percentage profit to be calculated on the Stock Control Settings | Options tab:

If you have chosen:

• Calculate as percentage of revenue.

  The profit percentage is calculated in the following way:

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

• Calculate as percentage of cost.

  The profit percentage is calculated in the following way:

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

When the sales profit is calculated for each type of transaction

Quotations and Pro forma invoices

• Estimated profit: Estimated profit is calculated when quotations and pro forma invoices are entered.

• Realised profit: Realised profit is not calculated for quotations and pro forma invoices.

Sales Orders

• Estimated profit: Estimated profit is calculated when sales orders are entered.

• Realised profit: The realised profit is calculated when the sales order is entered for certain types of stock item:

  • For Standard stock items, the realised profit is not calculated.

  • For Service/ Labour stock items, where the confirmation of despatch is not required, the realised profit is calculated using the cost price of the stock item.

  • For Service / Labour stock items, where confirmation of despatch is required, the realised profit is not calculated.

  • For Free Text items, where the confirmation of despatch is not required, the realised profit is calculated using the cost price specified on the sales order.

  • For Free Text items, where the confirmation of despatch is required, the realised profit is not calculated.

  Note: The confirmation of despatch for Service / Labour and Free Text items is set in the SOP settings.

Sales despatch

• Realised profit: This depends on the options you have selected in the SOP settings. If you have chosen:

  • Update Stock Quantities When - Order despatch is confirmed.

    The realised profit is calculated for all items requiring confirmation of despatch, using the cost price of the stock item.

    The realised profit is not calculated if the cost price of the goods is not known.

  • Update Stock Quantities When - Invoice is posted.

    The realised profit is not calculated.

Amend Despatch

• Realised profit: This depends on the options you have selected in the SOP settings. If you have chosen:

  • Update Stock Quantities When - Order despatch is confirmed.

    If you increase the quantity despatched, the realised profit is adjusted using the cost price of the stock item.

    If you reduce the quantity despatched, the realised profit is reduced.

  • Update Stock Quantities When - Invoice is posted.

    This has no affect on the profit amounts as the realised profit is not updated until the invoice is posted.

Post Invoice

• Realised profit: This depends on the options you have selected in the SOP settings. If you have chosen:

  • Update Stock Quantities When - Order despatch is confirmed.

    No changes are made to the realised profit.

    The realised profit is not calculated if the cost price of the goods is not known.

  • Update Stock Quantities When - Invoice is posted.

    The realised profit is calculated using the cost price of the stock item.

    The realised profit is not calculated if the cost price of the goods is not known.

Stock Adjustments (Goods In)

• Realised profit: For sales orders where the cost of the goods is not known, the realised profit is adjusted when stock is added with a confirmed price.

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.