Same like inventory profit margin report, can we get sales profit margin report?
this will help us to check profit we got by each sales invoice.
or
Now in inventory profit margin it will show the total Avg profit margin of the total sales of the items during the selected period in black text which is not clickable.
but, Inventory profit margin report should have clickable blue colored values so if we click on the item value it will show all the sales invoices or production orders or purchase invoices or any transactions related to that inventory item.
ex:
Item name, sales invoice number, total number of items, Invoice Total , Cost of sales, Profit, Margin%
I edited my inventory item transaction screen to Something like this
No. This would be impossible to calculate, because the program has no way of knowing your costs for a sales invoice. Unlike cost of goods sold, which allows you to determine profit margins by inventory item, when you sell a service or non-inventory item, the accounting system carries no cost. The value of any item that is not inventory is established only at the moment of sale. This is why P&L statements are often divided into gross profit and net profit. To calculate margin on a single sales invoice, you would have to be able to apportion every labor hour spent by every person in the company, all your overhead expenses, and so forth to individual sales invoices.
I assume by “sales profit margin report” you meant “inventory profit margin per sales invoice report”
Currently the inventory profit margin report shows the average profit margin for an inventory item from the sales invoices period selected. Your request is to have blue clickable figures within that report so that a drill down will display the related individual sales invoices along with their own profit margins. This way you can review the range of profit margins being achieved.
If this is achievable or not I can’t say, however what I can say is that the current inventory profit margin report only works from an inventory item’s average cost figure. So why you may see the sales invoice, you will never be able to see any related production orders or purchase invoices or any other transaction related to that inventory item from that drill down.
But in the current inventory profit margin report when i selected period Dec 1 to dec 31, i got this report.
(I cropped this report because i want to concentrate on this particular item GB - MAFIA 50
Then i realized Both the reports are true. Because till 20 DEC we sold this item as usual but after 21 DEC we donated so many of these items for free because of christmas .
If im able to select any period according to my requirement in this report, then i believe it is highly possible to get Blue clickable value in my Dec 1 to Dec 31 report to drill down to all sales invoices which shows can show profit margin per sales invoice transaction on item basis
It shows a 4,104.28 loss not profit, note the minus whereas the second report shows 19.77 profit.
These items donated for free shouldn’t have been processed via Sales Invoices if that’s what you have done. You would use the Inventory Write-off tab for items used for marketing, donations, spoilage and then you nominate an expense account to capture those costs.
With the above you could have an expense account called Product Donations, then you could see that your product give away cost you 35,796,708. This way your Sales less Cost of Sales doesn’t get distorted as you have illustrated and would be more accurate.
With correct processing the drill down becomes less of a requirement.
I created a new Business file in Manager and I tried this
If i just sell the product in sales invoice, i will get profit margin something around 25%
in the above same example,
If i sell the product + few products gave as promotion for free, my profit margin reduced to 19%.
Is it normal that my profit margin of that product will reduce because i gave discount?
If yes, then why my free distribution/ donations are to mentioned in Inventory write off?
Im confused
Whats the difference between discounts and donations?
why should i mention discounts in sales invoice?
why should i use inventory write off for donations?
Yes, of course. If you buy something for 100 and sell it for 125, you make a 25% profit. If you buy for 100 and discount to 110, you make only 10%.
Now, if you sell 100 units under the same circumstances of price and/or discount, you make the same profit margin. But if you sell 110 units for the same price, by “giving away” 10 units, your profit margin will be reduced.
When discounting, you sell at a lower price per unit. That is true whether you give a discount or include extra units. The difference is only in how you present the information to the customer. The information from the transaction will still be reflected in sales invoice reports, profit margin reports, etc. And average cost of inventory is not affected. If you had 1000 units in stock at an average cost of 80, then after selling 100 and including 10 extra units, you have 890 units in stock at the same average cost of 80.
When donating, you have no customer and no revenue. Nothing is reflected in sales invoice reports. Nothing is posted to any income account. Most important, if you donate items and write them off, the average cost of remaining stock goes up. Consider the previous example. 1000 units at 80 average cost gives Inventory on hand of 80,000. Donate 100 units and write them off, and you now have 900 units. But you still put the same 80,000 into acquiring them. So average cost is 88.89.
To show the customer they are receiving a discount. There is no financial difference between showing the discount and simply lowering the price.
So your average cost of inventory items is correct. After all, donations are only free to the recipient. You still have the expense, just as if the items were stolen or spoiled.
This is incorrect, the average cost remains at 80.00 as you would also have an expense of 8,000.00 (100 x 80) for the inventory written off.
Or put it this way, if you only had 100 in stock at an average cost of 80, so the Inventory on hand equalled 8,000. If you wrote off the entire 100 then you wouldn’t still have 8,000 in Inventory on hand
@raj_nann, please read @Brucanna’s post. He is correct about the average cost remaining the same. That’s because the written-off inventory comes out at the average cost. So the cost to you of writing things off shows up in an expense account, not in an increase to average cost (which would eventually show up as increased cost of goods sold when items are sold). My apologies for leading you astray.
As for discounts on sales invoices, you cannot do what you describe while using the built-in discount feature. That just lowers the selling price and thus reduces profit. If you want to keep track of how much discounts have cost you, you will have to enter additional lines and put in negative amounts for discounts on your sales invoices. These additional lines can be posted to a Discounts expense account. Financially, this will be equivalent to writing them off. You will need to decide if the knowledge is worth the extra work. The effects of discounts are already taken into account in the inventory item profit margin report.
