Sales order profit

When entering quotations, pro formas and sales orders, the profit you have made on each sales order is calculated. You can view this on the order and via the profitability reports. The profit is worked out for the whole order and for each order line.

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

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

Estimated and realised profit

Two profit values are calculated - estimated and realised.

• Estimated profit is calculated when the order is entered and so can be seen for quotations, pro formas and sales orders.

  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 is calculated when goods are despatched so can only be calculated for sales orders.

When the realised profit is not calculated

The realised profit is not calculated if the cost price of stock items is not known. This can occur when a stock item has a negative value. Once the stock level is adjusted, then the realised profit on the order is updated.

See How the cost price is calculated.

Profit calculation method

The profit percentage is calculated using:

• The Sale value for each 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:

• 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 and order 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

This depends 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.

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, using:

  • Sales Orders > Quotations > New Quote or New Quote for Prospect

  • Sales Orders > Proformas > New Proforma

• 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, using:

  • Sales Orders > Quotations > Convert Quote to Sales Order

  • Sales Orders > Proformas > Convert Proforma to Order

  • Sales Orders > Sales Orders > Enter New Order - Rapid

  • Sales Orders > Sales Orders > Enter New Order

  • Sales Orders > Sales Orders > Repeat Order Templates

• The realised profit is calculated when goods are despatched, using Sales Orders > Processing > Goods Despatched and Received > Despatch.

  Note: If you amend the quantity despatched, using Sales Orders > Processing > Goods Despatched and Received > Amend Despatch, the realised profit is increased or reduced according to your adjustment, using the cost price of the stock item.