There are lots of great tools, rules, and accountants to help businesses complete and analyze profits, sales, and costs.  Unfortunately, this is an area where clients frequently throw out the baby with the bath water.  They often fail to use Gross Margin Analysis.  Most business people understand the basic rules surrounding Gross Margin.  They just don’t execute them.

Gross profit calculations are best made by item, by category, by customer and many other variables, each of which may be critical to your success.

Gross profit—or “Gross Margin” is simply calculated by the following equation:

Gross Profit = (Sales – Costs) / Sales [Read more…]