How to calculate the profits of a project and the method of calculating net profit and loss –
how to calculate project profits, Profit is the greatest importance that everyone seeks to reach without exception, whether through small or giant projects, especially since profit guarantees the good performance of the company and the ability to expand in new paths, open other horizons for the project and improve the quality of work, and this requires organized planning with setting goals and developing strategies Whether in the current situation of the company or in the face of risks and emergency conditions, we explain in this article how to calculate the profits of a project.
What is a profit and loss account?
The profit and loss account is one of the financial accounts that projects issue periodically. Profit and loss percentages are often issued every quarter, and every year with the full budget and statement of cash payments, which is called the income account in the transaction system. We discuss the most important details about the profit and loss account as follows: follows:
- Similar to the cash flow statement, the profit and loss statement shows intra-account variations over the period.
- Also, a profit and loss statement is a financial report that summarizes the revenues, costs, and expenses incurred during a specific period of time.
- These records provide information about the company’s ability or inability to generate profit by increasing revenue, reducing costs, or both.
- In addition, P&L is also referred to as the profit and loss statement, income statement, statement of operations, statement of financial results and statement of income and expenses.
See also: How to calculate the profits of the Postal Savings Book 1444 and how to withdraw interest
The reasons that lead to making a profit for any small business
Success does not come by chance, and the entrepreneur needs several experiences to be able to achieve profit on a large scale, especially since the majority of small projects fail during the first five years, so it requires paving the way and solving all the problems encountered during the achievement of goals, and we reach that the reasons that lead to achieving The profit for any small project is as follows:
- Developing an action plan: small projects fail as a result of the absence of planning, and therefore the idea of the project must be scrutinized and the products and services to be provided and required in the market must be checked, and the most important axes that must be focused on:
- Market analysis
- Determine the target segment
- Competition analysis
- Marketing plan
- Funding sources
- Risk analysis
- Defining goals: The lesson is not to write a random list of goals, but the biggest challenge is to write realistic, ambitious and thoughtful goals.
- Organizing and managing time: Perhaps what distinguishes successful people most is improving time management and making better use of it, both in developing themselves and developing their expertise, as well as in transforming their ideas into projects and developing them.
- Financial management: Perhaps the reason for the lack of resources is not as bad as mismanaging them, and perhaps a project that started with a small budget succeeded and achieved its goals while large projects did not succeed.
- Investing in marketing, studies confirm that 14% of small projects fail due to poor marketing. It is not enough that the products are of high quality and solve consumer problems. Rather, the project needs marketing, as it is the main weapon to raise awareness of your brand.
See also: Mobile shop project, feasibility study, cost and profits 2023 with success factors
How to calculate project profits
Any institution seeks to maximize its capital and increase its own profits, so the final accounts are an accurate way to determine the percentages of profits and losses in the facility, and through these accounts the management is assisted in avoiding fraud and errors and controlling its various accounts, and we explain the following how to calculate the profits of the project:
- Where the rule says: Gross Profit = Sales – Value of Goods Sold
- An illustrative example: In order to calculate the total profit of a company whose sales value is about 250,000 thousand dinars, and the value of the sold goods amounted to 100,000 dinars, then:
- Gross profit = sales – value of sold goods = 250,000 – 100,000 = 150,000 dinars.
Calculation of the profit percentage
- Profit % = Net Income / Net Sales (Revenue) x 100%.
- An illustrative example: The value of sales for a commercial company amounted to 250,000 thousand dinars, and the value of net income was about 500,000 dinars, so:
- Profit percentage = net income / net sales x 100% = 500,000 / 250,000 x 100% = 200 (2%).
See also: How much dividends are Aramco shares in 2023, and the dates of entitlement and distribution
How to find out the net profit and loss
To calculate the net profit for a project, all costs are subtracted. As for the mathematical equation, it is as follows: net profit = sales revenue – total costs. In a simple way, the net profit is the money remaining after paying all the expenses necessary to manage the project. When calculating net profit and loss, the following concepts are taken into account. :
Earnings calculation for a shop
- The total profits in the project are the profits accumulated entirely from the total sales from the beginning of sales until the calculation of profits.
- Also, partial profits are the profits that were calculated during a certain period.
The break-even point when calculating gross profit
- Where the total revenue from the project is equal to the expenses it consumes, whether it is a full account or a partial account.
Calculating losses for a shop
- Expressing the concept of loss as the excess of the cost of project expenses over the price of revenues collected from the project
Project sales account
Informed and adequate study in a research manner or mathematical equations to include costs, expected profit and loss percentage, as well as the percentage of sales, all of which contribute to the success of the project. Here are the most important concepts related to the project sales account:
- Output should be calculated for products sold either at wholesale or retail price.
- On top of that percentage that was charged at the beginning, keeping in mind that the amount may not be received for all sales.
- In addition, some products may be sold in installments or sold and paid for in full.
- Sales are also calculated through receipts as well as what is recorded in the books of the commercial project
Estimating the costs of a commercial store project
Cost decisions are often made through a clearer picture of the future commitments that will be required by the project, and if the life cycle cost is taken into account, the results will be positive and the profits will be better, and we explain the following how the costs of a commercial store project are estimated:
- Where the amount of expenses incurred by the project is determined, noting that the project has fixed expenses.
- The rent of the place or its purchase price, if it is property, must also be calculated.
- In addition, the money spent on obtaining place permits and papers must be calculated.
- In addition to calculating the cost of the money that was used to purchase any equipment for the place or any services needed by the place.
- The costs include calculating the salaries and wages required by the workers and are added to the production expenses.
- It is necessary to take into account the funds that are consumed in the means of transportation, whatever the nature of their work, is the transportation of production or the transportation of workers.
- In addition to calculating the cost of the intermediary who buys the raw materials needed by the project, he takes a percentage in return for selling the materials at a reasonable price.
Watch also: Reveal the profits of YouTube channels 2023 and the best site to know and calculate them
How to calculate the profits of a project. In this article, we mentioned the most important details of calculating the profits and losses of commercial projects, as many seek to invest in these projects due to their great importance in the process of sustainability and economic development, which is beneficial to the individual and society.