How to calculate the daily profit of a kiryana shop

How do you calculate the daily profit of a kiryana shop?

A kiryana shop's daily profit is the day's total sales (cash, udhaar and card or wallet payments together), minus what those goods cost you to buy, minus the day's share of expenses such as rent, electricity and salaries. The first subtraction gives gross profit. The second gives the profit you actually keep.

As one line: sales − cost of goods sold − expenses = profit. The steps below are about getting those three numbers right.

Why isn't the cash in the drawer your profit?

The drawer shows money received today, not money earned today. Most of it is the purchase price of the goods you sold, which you will hand back to the distributor on the next delivery. It also includes udhaar that customers paid back for old days, and it leaves out today's udhaar sales and anything paid by JazzCash, Easypaisa, card or bank transfer.

That is why a shop can have a heavy drawer every evening and still run short of money to restock at the end of the month. Checking the drawer is the cash-up, covered in /blog/shop-hisab-kaise-kare. Profit is a separate job that needs the cost of what you sold.

What counts as a sale: cash only, or udhaar too?

Every item that left the shop today is today's sale, however the customer paid. An udhaar sale counts on the day the goods left, not on the day the money comes in.

• Cash sales: counted in today's sales.
• Udhaar given today: counted in today's sales, and added to the customer's khata.
• JazzCash, Easypaisa, card or bank transfer: counted in today's sales, even though the money is not in the drawer.
• Udhaar recovered today: not a sale. It lowers the customer's balance and adds cash to the drawer, but it was already counted as a sale on the day the goods left.
• Returns: take the returned item's price off today's sales.

How do you find the cost of the goods you sold?

The cost of goods sold is what you paid for the items you sold today, which is different from what you bought today. There are two ways to find it: add up the purchase price of every item sold, or use the stock method (opening stock plus purchases minus closing stock), which works better over a week or a month than for a single day.

Item by item

For each item you sold, multiply the quantity by its purchase price. Use the landing cost, not only the distributor's rate: a rickshaw to bring the cartons or a loader's charge is part of what the goods cost you. When the distributor's rate changes, update your price list the same day, or every profit figure after that is wrong.

The stock method

Take the value of your stock at the start of the period, add everything you bought during it, and subtract the value of the stock left at the end. The result is the cost of goods that left the shop, whether sold, spoiled or missing. It catches expiry, breakage and theft that an item-by-item total never sees, but it needs a stock count, so it suits a month better than a day.

Which expenses come off daily profit?

Take off every cost of running the shop other than the goods themselves. Divide monthly bills by the number of days the shop is open, so each day carries its fair share.

• Rent: the monthly rent divided by the days you open.
• Bijli, gas, phone and internet: each month's bill spread the same way.
• Salaries: the helper's or cashier's monthly pay, per day.
• Daily small costs: shoppers and packing, tape, tea for the counter, a rickshaw for a delivery.
• Wastage: the purchase price of anything that expired, leaked or broke.

Money you take home for the household is not a shop expense; it comes out of profit afterwards. Mixing the two is one of the main reasons owners cannot tell whether the shop is earning.

What does a worked example look like?

Here is one day at an imaginary kiryana shop. The numbers are made up to show the method; they are not typical figures for any real shop.

1. 1Sales: 30,000 rupees in cash, 12,000 on udhaar and 6,000 by JazzCash and Easypaisa, so 48,000 rupees of sales in total.
2. 2Cost of goods sold: the items sold cost 42,000 rupees to buy, landing cost included.
3. 3Gross profit: 48,000 − 42,000 = 6,000 rupees.
4. 4Expenses for the day: rent of 45,000 a month over 30 days is 1,500; electricity 600; a helper on 24,000 a month is 800; shoppers and small costs 200. That is 3,100 rupees in all.
5. 5Net profit: 6,000 − 3,100 = 2,900 rupees.

Now look at the drawer the same evening. It holds the 30,000 of cash sales plus, say, 8,000 of old udhaar a customer paid back: 38,000 rupees. Against a real profit of 2,900, the drawer tells you almost nothing about how the day went.

The example also shows how thin the margin on groceries can be. Here the shop kept about 6 rupees of every 100 it sold, so a few cartons sold below cost or a crate of expired stock can wipe out a whole day.

Why does a busy day sometimes make less profit?

Profit depends on what you sold as well as how much. Staples such as sugar, flour and cooking oil usually sell on a very small margin, while snacks, loose items and household goods carry more. A day of heavy staple sales and discounts can bring in more cash and less profit than a quieter day.

Working out profit item by item shows which lines pay the rent and which only move cash through the drawer.

Should you check profit every day, or once a month?

Record sales and costs every day, but judge profit over a week and a month. A single day jumps around with a big wholesale order, a rainy day or a delivery of stock that lasts two weeks. Seven days side by side show the trend, and a monthly stock count tells you whether the item-by-item numbers were honest.

Can a POS work out profit for you, and who doesn't need one?

A POS can do the adding up, but only if every product carries its purchase price and every sale is recorded at the counter as it happens. No software can tell you your profit if you don't know what your goods cost. A small shop with a short price list and an owner who writes everything down can do all of this in a notebook.

In NexusTill, every product has a cost price next to its selling price. The Profit & Margin report takes each item sold over the days you choose and shows its revenue, its cost (quantity times cost price), its gross profit and its margin. It is on every plan, Starter included, alongside the daily cash-up (Z-report) for the cash side of the day. Udhaar sales go on the customer's khata at the till, so they count as sales without being mistaken for cash.

On Growth, the analytics view also takes the expenses you record off the gross profit, so the net figure is ready without a calculator. One limit: the report uses the cost price saved on each product, so when the distributor's rate changes, change the cost price too.

Compare what each plan includes on /pricing, and try it on your own shop for 7 days. No card is needed, and nothing is charged when the trial ends.

Written by NexusTill Team.