How profit is calculated

Most merchants know what they sold. Fewer know what they kept. The difference between those two numbers is every cost that happens between the sale and the money.

The path from selling price to net profit

The system walks this order on every order:

1. Revenue — what the customer actually paid
2. Less discount — a coupon or a reduction, if any
3. Less cost of goods (COGS) — from the batch the unit was actually bought in
4. Less shipping — outbound, and return shipping if it came back
5. = net profit on the order

Those figures then roll up by product, by period and by campaign.

Cost of goods

This is the most important input in the whole calculation.

Cost comes from the stock batch the product was sold from — not from an average and not from an estimate. If you bought the same product twice at two prices, each sale is costed at its real cost.

Shipping

Outbound shipping is a cost on the order. Return shipping is a further cost if the order comes back — whether as a return after delivery or an RTO without delivery.

That is why per-governorate shipping rates need to be right from day one: every pound of difference there becomes a difference in net profit on every order.

Returns and RTO

Explained in full in Returns and RTO. What matters here: both enter the calculation, and RTO enters as a cost with no revenue against it.

Profit per product and per order

The system does not only compute profit at store level:

• profit per product — which product actually makes you money after everything
• profit per order — order by order
• profit per campaign — whether the ad brought money in or sent it out

Costs that are not included yet

When is revenue counted?

On the financial numbers page, revenue counts the payments that settled in the period. And on cash on delivery, payment settles when the order is delivered — because that is when the customer pays the courier.

Next

• Understanding your numbers — when a figure can be trusted
• Inventory and stock — where the cost comes from