{"id":264025,"date":"2023-06-27T15:43:49","date_gmt":"2023-06-27T03:43:49","guid":{"rendered":"https:\/\/www.reckon.com\/au\/?page_id=264025"},"modified":"2025-05-20T17:42:55","modified_gmt":"2025-05-20T05:42:55","slug":"calculate-net-profit","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/au\/glossary\/calculate-net-profit\/","title":{"rendered":"How to calculate net profit"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Definition description” _builder_version=”4.21.0″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n

Your net profit, or net income, is a vital business metric used in understanding how much money you\u2019re making after considering your business expenses and running costs.<\/p>\n

While gross profit only considers your COGS or cost of goods sold<\/a>, net profit goes further. Net profit includes every overhead to reveal the overall profitability of your small business.<\/p>\n

Net profit formula<\/h2>\n

The formula used to calculate net profit<\/a> is as follows:<\/p>\n

Net Profit = Revenue – Total Costs<\/strong><\/p>\n

[\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2024\/05\/gross-profit.png” alt=”Gross profit = revenue – cost of goods sold Gross profit margin = (revenue – COGS) \u00f7 revenue \u00d7 100″ title_text=”Gross Profit” _builder_version=”4.27.2″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text admin_label=”Definition description + related terms” _builder_version=”4.27.4″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

What are total costs?<\/h2>\n

To understand your net profit, you must first calculate \u2018total costs\u2019, or every single expense<\/a> you incur in running your business. This includes materials, rent, marketing, power, wages, taxes, depreciation<\/a> et cetera.<\/p>\n

Net profit margin<\/h2>\n

Your net profit margin is a useful way of expressing your net profit for reporting and planning<\/a> purposes. When you can see your business\u2019s profitability as a percentage, instead of a whole number, you have a clearer overview of your performance.<\/p>\n

A higher net profit margin means you’re making more money per dollar spent. Once you understand your net profit margin, you can monitor when it dips too low and can work to improve it.<\/p>\n

Net profit margin formula<\/h2>\n

To calculate net profit margin, the formula is as follows:<\/p>\n

Net Profit Margin = (Revenue – Total Costs) \/ Revenue x 100<\/strong><\/p>\n

Net profitability<\/h2>\n

Generally, to calculate profit margin, you’ll need to know the percentage of revenue you have left after deducting all the expenses you incurred in generating that revenue.<\/p>\n

Indeed, your net profitability paints a stark picture of how much money you\u2019re making after all expenses are accounted for. It is an extremely useful metric that shows you how healthy and profitable<\/a> your business is.<\/p>\n

 <\/p>\n

See related terms
<\/strong>What Is net profit?<\/a>
What Is gross profit?<\/a>
Gross profit vs net profit<\/a>
How to calculate gross profit margin?<\/a><\/p>\n

 <\/p>\n

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Your net profit, or net income, is a vital business metric used in understanding how much money you\u2019re making after considering your business expenses and running costs. While gross profit only considers your COGS or cost of goods sold, net profit goes further. 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