Finance & Expenses
Profit, COGS & Finance: Understand Margin, Net Profit and Cash
2 min read
Profit is calculated properly here: revenue minus cost of goods sold (COGS) gives gross profit and margin, expenses give net profit, and ad spend gives profit after ads. Understanding these lines helps you price, spend and grow with confidence.
How profit is built up
Each layer subtracts a real cost so you see what you actually keep.
Cash position
Profit is not cash. Cash position compares COD collected against pending COD and paid expenses, so you can see liquidity separately from accounting profit — vital in COD businesses where money sits with couriers.
Unit economics
Per-order economics break revenue, COGS and ad cost down to a contribution per order, revealing whether each sale is actually profitable after acquisition cost.
Step-by-step
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1
Set product costs
Ensure cost per item is set so COGS can be computed.
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2
Record expenses
Capture overhead so net profit is accurate.
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3
Open the P&L report
Review gross profit, margin and net profit for your range.
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4
Check cash position
See COD collected versus pending and paid expenses.
Frequently asked questions
Why is gross profit zero?
COGS needs cost per item on your products. Without it, only revenue can be reported.
Is COD pending counted as profit?
Revenue is recognised on orders; cash position separately shows COD still pending so you know what has not yet been collected.
What is contribution per order?
Average revenue minus average COGS and ad cost per order — the profit each order contributes before fixed overhead.
Troubleshooting
Margins differ between products.
Check each product’s cost per item; missing or wrong costs distort margin.
Net profit and cash disagree.
That is expected — profit is accrual, cash position reflects money actually collected and paid.
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