Here we explain how we calculate Gross Profit and where the common data quality issues that adversely affect it.
Last updated 06 Dec 2023
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Introduction
Gross Profit is the revenue that you have made from the sale of that item, less the cost of sale (ie. how much it costs to make). This can be expressed as a monetary value or a percentage.
This is a useful measure of the profitability of individual items and helps you to achieve feasible pricing structures.
Please take a look here to see how Kobas calculates your stock values.
Note: It is important to note that this article isn't intended to provide any financial training, but simply to highlight terminology used within Kobas, and where specific financial information is located within the system.
A quick note on other terminology:
| Cost of sale | This is how much an item costs to make. Within Kobas this is derived from the cost of the portion of the ingredients assigned. |
| Labour cost | This figure is the total cost of your staff and should include National Insurance and pension employer contributions, any bonus accrual, and holiday pay. It is often expressed as a percentage of the day's net revenue. |
| Operational profit | Your operational profit is calculated by subtracting your total cost of sales and cost of labour from your expected net revenue. |
| Revenue | Revenue figures relate to money taken by the business that derives from the sale of items. This figure can be expressed as Gross (before VAT) or Net (less VAT). |
| Payments | Payment figures within Kobas differ from Revenue because they are the sum of all payments received and as such include revenue by Cash/card/online, but also include gratuities and cash variances. This figure can be expressed as Gross (before VAT) or Net (less VAT). |
| Expected / Theoretical vs Actual | Within Kobas, 'actual' figures are taken from places where users enter the figures in (ie. Cash Log input and Stock Check). Whereas 'expected' or 'theoretical' figures are calculated by Kobas from EPoS and Cloud usage (ie. Items used on EPoS/CIC and actions recorded in Cloud). Variances are the difference between the two figures. |
| Cost of Wastage | This is the cost of sales of items that were wasted or given out for free. Most businesses monitor this outside of Gross Profit calculations and have a separate line on the Profit & Loss account. This allows the figure to be monitored separately. |
| Profit & Loss account | This term relates to a specific accounting tool that shows all of the incomings and outgoings of a business and works out various types of Profits and Losses made. |
| Net Margin | The net margin figure is a monetary value, showing you what you have made less tax and cost of sales. |
| Control Gap | This is the difference between actual usage and cost of sales, expressed as a proportion of the total net revenue generated in the given period. Waste, comps and director items will increase the control gap in additional to traditional variances between actual and theoretical usage. |
This information is presented in summary format, per venue per year, in the Operational Profitability report.
How can I explore Gross Profit within Kobas?
For the Groups Profit figures to be accurate in the stock system, the following information needs to be completed within your account:
- Ingredients set up correctly, with correct costs
- Deliveries are recorded correctly, Batches, EPoS Items, and modifiers.
- You are logging Waste and Comp correctly.
There are many places within Kobas you have visibility of Gross Profit, to help with your financial decision-making. Here are some of the most common locations:
In order for Gross Profit figures to be accurate within the Sales/Revenue elements of our system, you will need to ensure:
- All EPoS Items have a cost price.
- You are logging Waste and Comp correctly.
Manage EPoS Item
This can be located by going to EPoS > Item (PLU) Manager and choosing Edit on the appropriate EPoS Item.
On this screen, you will see the above Retail Prices table. Cost Price is automatically populated when you add the Recipe under the appropriate tab. However, a Cost Price can be manually added in. This means even those not using the Kobas Stock System can achieve accurate Gross Profit figures.
You will then see the Net Margin monetary figure and the Gross Profit figure expressed as a percentage.
Bulk EPoS Item Manager
By going to Item (PLU) Manager > EPoS Item Importer/Export, you can download a list of your EPoS Items, which will include their current Cost Price and GP% for each Consumption Mode.
Manage Modifiers
This can be located by going to EPoS > Modifier (PISC) and choosing Edit on the appropriate group.
In the pricing section of each answer, a similar process will apply as with EPoS Items. The cost will pull through from the recipe or can be added in manually or overridden. The Gross Profit percentage displayed here simply relates to the price change and cost within the Modifier Answer, and doesn't in any way cumulate with the PLU price/GP.
Price Band administration
If you access this information by going to EPoS > Menu Administration > Manage Menu Layout and left-click once onto an EPoS Item, you'll see this screen:
You can see across the top the various consumption mode prices, margins, and Gross Profit figures are displayed. Below that you have the ability to quickly edit the prices within a price band, and you can see the adjusted Margin and Gross Profit figures.
Item Sales (All) By Date Report
This report is available by going to Reports > Revenue Analysis > Item Sales (All) By Date and selecting the required venue(s) and date range.
The first table to open is your Lead Type summary, which will show you various figures including your Gross Profit as a percentage for the selected venues and date ranges.
By clicking on a Lead Type, you will open a second table with all of your items, grouped by categories, and you can see the same detail but for categories and individual items.
If you Waste, Comp, or Director any items, they will affect your margin and GP overall. This is because the cost of the ingredients has been used, but no revenue generated from them. Therefore this will bring down your overall Margin and GP.
You can also decide how Modifiers are shown in this report, or choose to analyse them separately.
Note: When you export the Item Sales (All) Report, you will also see some columns that allow you to make informed business decisions:
- Potential Net Revenue - This figure shows the money lost on these items due to discounts, promotions and price adjustments.
- Achieved Theoretical GP% - This is the GP% made based on the sales of the item, this is reduced by Comp, Waste, Director, Refunds and Price Adjusts.
- Target Theoretical GP% - This is the GP% set in the Item Manager either based on a manually entered cost price, or a cost price based on ingredient costs.
Stock Usage Comparison Report
This report displays Gross Profit percentage figures as they relate to ingredients, please see the stock reconciliation article for further information.
This report is also exportable and the export details each ingredient actual achieved GP in the period selected.
Operational Profitability Report
This information is presented in summary format, per venue per year, in the Operational Profitability report.