Simple Ways to Calculate Small and Medium Business Net Profit

In business, you are certainly familiar with the term profit. Profit is divided into two types, namely net profit and gross profit. Profit, especially net profit, has a very important role in business. How to calculate net profit is different from gross profit. Check out the definition of net income below before going into the discussion on how to calculate net income.

Definition of Net Profit

net profit or net profit is the net profit earned by a business from sales. The word 'clean' here means the value of the profit earned has been reduced by the expenses and expenses tax income.

Net profit is also often referred to as pure profit from sales. The value of net income is very important for a business. Why? Because net income is goal of every business.

Getting a net profit, especially with a high value, is the dream of every business. In addition, the value of net income can also be an indicator of whether promotion what the business does is successful or not.

Difference between Net Profit and Gross Profit

Apart from net profit, there is also gross profit. Gross profit is the total revenue from sales. This gross profit value has not been deducted by all expenses for production, promotions and more. Thus, gross profit is not pure profit from a sale.

The greater the value of gross profit does not guarantee that sales generate large profits. There is still a possibility that the gross profit value is also accompanied by the large production value.

How to Calculate Net Profit

Calculating net income is actually quite easy. The hard part is just gathering the required data, such as totals income and the amount of expenditure.

By definition, you probably already know how to calculate net income. The following is the formula for calculating net income:

Gross profit is equal to the total revenue earned from sales. Meanwhile, expenses are the total expenses for the sale. So, in simple terms, net income can be obtained by calculating total income - total expenses.

After you follow the method of calculating net profit above, you can get a pure profit value from your sales. By routinely calculating net income, you can see whether there is an increase in profits or not. Then, you can also review your sales strategy to get a bigger net profit.