What is the difference between revenue, gross profit, and net profit

In Torgsoft, revenue, gross profit, and net profit are different analytical indicators that cannot be equated. Each of them is calculated using its own formula and is used for different managerial tasks: sales control, product margin evaluation, and calculation of the final financial result of the enterprise.

Confusion between revenue, gross profit, and net profit often leads to incorrect reading of reports and erroneous managerial conclusions. This is especially important when you need to give sellers access to performance indicators, but not show the cost of goods or the actual profit of the store. If you are in doubt about which exact indicator is used in a specific Torgsoft report, it is better to first check the calculation formula or clarify this with technical support.

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In the Torgsoft program, the terms «revenue», «gross profit», and «net profit» are not synonymous. These are different analytical indicators that are calculated according to clear formulas:

1. Revenue (sales volume)

This is the actual amount of money received in the cash register from customer purchases. Formula: Sum of sales (including discounts) minus Sum of returns (including discounts). The financial expenses of the enterprise are not deducted from this amount.

2. Gross profit (product profit)

This is the amount the business actually earned from the sale of goods after deducting their purchase cost. Formula: Revenue minus Cost of goods sold (plus the cost of returned goods).

3. Profit (net profit of the enterprise)

This is the final financial result. Formula: Gross profit (Product profit) minus Enterprise expenses (rent, salary, bank services, utility bills, etc.).

Reporting for seller control

If you need to give sellers access to check their results, but hide the cost of goods and the store's profit, the «Product profit by days for the period» report is not suitable. For this, you should use the «Product report for the period» or the «Analysis of work for the period by receipts» tab in the employee settings, where only sales amounts without cost are displayed.

Where these indicators are analyzed in Torgsoft

Revenue and gross profit are used to evaluate effectiveness in most of the program's analytical reports:

• Trade report;
• Summary report for the period;
• Report for the period by departments;
• Comparative report by months;
• Analysis of trade gross profit;
• Comparative analysis of revenue by product types;
• Analysis of sales by product types;
• Analysis of gross profit from sales by product manufacturers;
• Analysis of gross profit by suppliers;
• Research of gross profit by product types;
• Analysis of product movement by supply batches;
• Analysis of profitability of the receipt invoice;
• Profitability of sales for the period;
• Payrolls (when calculating salary as a percentage of the seller's/team's revenue or gross profit).