In business matters, how to calculate profit is an important thing that must be known.
Because, without doing this calculation, it will be difficult for us to know whether a business is going well or if it has the potential to suffer losses that might result in bankruptcy.
Besides being used to analyze ongoing business activities, profit is also the main goal of creating the business.
So, how do you calculate an easy and effective profit? Let's discuss more in this one article.
Definition of Gross Profit
Profit or profit in business is divided into two. The first is gross profit and the second is net profit. Before we get into how to calculate profit, let's first understand what gross profit and net profit are.
Gross profit is profit before deducting operational costs, taxes, employee wages, and others.
Gross profit cannot be said to be pure profit. Because, in it, there are still production costs, service costs, marketing costs, and other costs that need to be reduced before it can finally be said to be net profit.
Definition of Net Profit
Net income or net income is the profit earned by the company and has been deducted from other expenses.
The expenses include:
1. These expenses include:
2. Operational Cost
3. Sales, Administration, and General Expenses
4. Income Tax
5. Loan Interest
6. Depreciation Costs, For example, Equipment Depreciation
In addition to the benefits derived from reducing expenses, how to calculate net income can also be obtained from additional income.
For example, a company invests some of its funds in short-term investments. The income earned from these investments is included in net income. In addition to investment returns, the sale of assets can also be considered income.
The function of Profit Calculation
Profit has a quite crucial function, which indicates the profit earned by the company at the end of the period or at the end of the day.
Not only that, but the existence of a way to calculate profit can also show if a business or business is experiencing good development from time to time or actually experiencing a decline.
Well, departing from here, the company will be able to determine future plans so that existing business activities can continue to run and generate significant profits.
If described one by one, the function of profit is:
1. As an Indicator of Financial Stability
2. As an indicator of profit gain during one period
3. As Material for Consideration and Evaluation To Take Future Business Strategies
4. As a determinant of a company commensurate with the existing investment risk, this indicator is usually the main consideration for investors
5. As a determinant of whether or not a company is eligible to obtain a business loan from creditors or financing companies
6. Helping Business Owners to See the Weaknesses and Strengths of a Running Business
Factors Affecting Profit
There are various factors or variables that affect how to calculate profit, both gross profit, and net profit.
Factors Affecting Net Profit
Several factors that have an influence on net income include:
- The quantity or number of products produced and sold
- Depreciation costs of equipment and room utilities used to produce a product
- Variable costs, namely the number of costs that must be incurred to buy products that will later be sold
- Fixed costs consisting of employee wages, taxes, and others
- Rental costs, marketing costs, to employee benefits
Factors Affecting Gross Profit
How to calculate gross profit is influenced by several factors which include the number of products, the selling price of the product, and the cost of goods sold (HPP).
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Number of Products or Services
The more products or services you sell, the more profit you can get
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Product Selling Price
The higher the selling price of a product or service, the higher the gross profit
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Cost of Goods Sold (HPP)
If the amount of HPP is equal to or equal to the selling price of the product, the profit obtained will be even greater
How to Calculate Net Profit and Gross Profit
Net profit and gross profit can be calculated easily as long as all the required data has been collected.
To make it easier for you to calculate it, here's how to calculate profit you need to know.
Image Source: Pexels/Tima Miroshnichenko
Easy Ways to Calculate Gross Profit
Calculating gross profit can be done using the gross profit formula where the income earned is reduced by the cost of goods sold (HPP).
Gross Profit = Revenue - COGS
For the record, revenue is the result of product sales. While the cost of goods sold (HPP) is the cost of producing goods or services produced.
Example of Gross Profit Calculation
To make it easier for you to understand the calculation of how to calculate profit, consider the following example story.
A snack food company has a breakdown of profit and loss as below.
Net Sales: IDR 100 Million
Cost of Goods Sold: IDR 40 Million
Marketing Fee: IDR 10 Million
Administration Fee: IDR 10 Million
Tax: IDR 5 Million
From the available data and information, the gross profit calculation is as follows.
Gross Profit = Revenue - COGS
Gross Profit = IDR 100 Million - IDR 40 Million = IDR 60 Million
Easy Ways to Calculate Net Profit
How calculate net income is not difficult. You just need to calculate it using the net profit formula. The formula is as follows.
Net Profit = Total Income - Total Expenditure
In addition, you can also use other formulas as below.
Net Profit = Gross Profit - Expenses
An example of the calculation is as follows.
With the example of calculating gross profit above, the gross profit printed by a snack food company is Rp. 60 million. Meanwhile, there are several costs that must be charged annually, namely income tax (Rp 4,500,000), company operational costs (Rp 5,500,000), and loans to banks with a total of Rp 12,000,000. Thus, the net profit obtained by the soft drink Company is:
Net profit = IDR 60,000,000 – (Rp 4,500,000 + IDR 5,500,000 + IDR 12,000,000) = IDR 60,000,000 – IDR 22,000,000 = IDR 38,000,000
The net profit obtained by the beverage company during 2022 is IDR 38,000,000.
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