Billing is the sum of the earnings obtained by a company, while the profit is the billing minus the costs that the company had. A company’s profit can be divided into net and gross profit.
For example, a store sold 100 shoes for R $ 50.00 each. Its turnover was R $ 5000. However, the store had costs of R $ 3000. Decreasing the costs of the billing amount, we know that the company’s profit was R $ 2000.
Billing – Costs = Profit
What is billing?
Billing is the value that a company obtains through the sale of products or the provision of services. It is the money that goes into the box.
The invoicing of a company must be presented to the bodies in charge of the inspection, containing descriptions of the values obtained in the commercialization of products. These bodies responsible for inspection and taxes call the company’s revenue as gross revenue.
What is gross and net profit?
Profit is the final value that the company has, after the expenses are reduced from the invoicing. This profit can be divided between gross and net profit, according to the types of expenses.
Gross profit is defined according to a company’s variable costs. Variable expenses are those that depend on the quantity of goods produced, or the amount of service provided, such as raw materials.
The amount of ingredients purchased for a pizzeria, and the expenses related to that, will vary if 10 or 100 pizzas are sold in a month.
Billing – variable costs = gross profit
Net profit is the amount billed, less variable costs, fixed costs and taxes.
These fixed costs are those that exist regardless of the number of items you sell or the service you provide, such as employee salaries, or renting a space.
Types of profit in relation to tax assessment
The calculation of taxes of a company can be based on four types of profit: real profit, presumed profit, simple national or arbitrated profit. For that using the sales tax calculator is really helpful.
Billing – variable costs – fixed costs – taxes = net income
Thus, a high turnover does not necessarily mean that the company will make a profit. For this, managers must be aware of their fixed and variable expenses, so that at the end of the month their billing is sufficient to pay the commitments, and there is profit (money left over after covering the costs).
To achieve a satisfactory net profit, it is important for the company to carry out financial planning, create alternatives to improve productivity and control operating expenses.
The calculation of the profit margin is also important, so that the company has a better idea of how much to sell its products, according to how much it needs to have return.