Plenty of shops are busy but not profitable — because revenue is not profit. To know what you actually earn, you need two simple ideas: cost of goods sold (COGS) and profit & loss (P&L). No accounting degree required.

What is COGS?

COGS is what the products you sold actually cost you — the purchase price plus directly related costs. If you sold a shirt for Rs 1,500 that cost you Rs 900, your COGS on that sale is Rs 900 and your gross profit is Rs 600.

Gross margin in one line

Gross margin % = (Sales − COGS) ÷ Sales × 100. In the example above: (1500 − 900) ÷ 1500 = 40%. Tracking margin tells you whether your pricing and buying are healthy.

What a Profit & Loss shows

A P&L takes your sales, subtracts COGS to get gross profit, then subtracts running costs (rent, salaries, marketing, utilities) to reveal net profit — the number that actually matters.

  • Sales
  • − COGS = Gross Profit
  • − Expenses = Net Profit

Check it weekly, not yearly

Small leaks — a supplier price rise, creeping discounts, slow stock — are invisible month to month but obvious in a weekly P&L. A system that calculates COGS and P&L automatically with every sale means you never have to wait for an accountant to know where you stand.

FAQ

Is gross profit the same as net profit? No. Gross profit is before running costs; net profit is after. You can have strong gross profit and still lose money if expenses are too high.

Want to see this in action for your own shop? Book a free demo with our team, or explore the full feature list.