Learn the ABCs of running a business, managing your finances and handling all about your accounting.
What is Net profit?
Net Profit is the amount of money your business earns after deducting all operating, interest, and tax expenses over a given period of time. Net profit is very important because it determines the financial health of your business. It shows whether your business can make more than what it spends. You can use your net profit to help you decide when and how to work towards expanding your business and when to reduce your expenses.
For a business owner, it is important to know the difference between net profit and regular profit (gross profit).
Net Profit is an absolute number that is equal to revenue minus expenses.
What is Gross Profit?
Gross profit is the profit a business makes after subtracting all the costs that are related to manufacturing and selling its products or services. You can calculate the gross profit by deducting the cost of goods sold (COGS) from your total sales.
Gross profit is a measure of how efficiently an establishment uses labour and supplies for manufacturing goods or offering services to clients. It is an important figure when checking the profitability and financial performance of a business.
What is an Invoice?
An invoice is a time-stamped commercial document that itemizes and records a transaction between a buyer and a seller. If goods or services were purchased on credit, the invoice usually specifies the terms of the deal and provides information on the available methods of payment.