The short answer: your shop is making a profit when your total sales, minus the cost of the goods you sold, minus every running expense, leaves a positive number. Cash in the drawer is not profit — a lot of that money already belongs to your suppliers, your rent and your staff. To know your real profit you need three numbers: revenue, cost of goods sold (COGS), and expenses.
Why a “busy” shop can still lose money
Plenty of shops take good money every day and still go backwards. It happens because the owner watches the till total instead of the three numbers that decide profit. High sales with thin margins, slow-moving stock, and small leaks — discounts, wastage, unrecorded expenses — can turn a busy month into a loss without any obvious warning sign.
The simple profit formula
There are two profit numbers every retailer should know:
- Gross profit = Sales − Cost of goods sold. This tells you if your pricing and buying work.
- Net profit = Gross profit − Running expenses (rent, salaries, utilities, marketing, fees). This is the money you actually keep.
Here is a hypothetical example to make it concrete. Say in one month you sell goods for 500,000. The items you sold cost you 350,000 to buy, so your gross profit is 150,000. Your rent, salaries and bills for the month come to 110,000. Your net profit is 40,000 — that is the real result, not the 500,000 that passed through the till.
The four numbers to track every month
- Revenue — total sales, after returns and discounts.
- Cost of goods sold — what the sold items actually cost you, using the price you paid, not the shelf price.
- Operating expenses — every recurring cost, including the small ones you tend to forget.
- Gross margin % — gross profit ÷ revenue. Watch the trend; a falling margin is an early warning.
Where profit quietly disappears
- Untracked COGS. If you don’t record what each item cost, your “profit” is a guess.
- Dead stock. Money sitting on shelves for months is money not working for you.
- Discount creep. Small, frequent discounts add up and eat margin invisibly.
- Cash expenses off the books. A bill paid from the drawer that never gets recorded overstates your profit.
How to get these numbers without a spreadsheet marathon
Working this out by hand every month is slow and error-prone. The reliable way is to let your point-of-sale and accounting record it as you go: every sale captures its cost, every expense is logged, and the profit is calculated for you. That’s exactly what an all-in-one system like RushFlow does — your gross and net profit are always up to date, per branch, without a separate bookkeeping exercise. If you want to see it first, try the live demo.
Once you can see profit clearly, the next step is protecting it across locations — see how to manage multiple shop branches without losing control.