Calculating profit with vat
We are struggling a bit with vat calculations when calculating profits per items
When checking the item do you check if the product is profitable do you add the vat you need to pay or do you do that at the end. Because a lot of the products we sell would be profitable if we don’t account for the vat and vice versa
21 replies
Seller_7VbclcPFFRTnc
You can work it out easier with the net amounts
So take the net selling price (total minus vat collected) and take away the amazon fees total , the net postage costs if fbm and net cost of the item
Obviously overheads need to be apportioned
Seller_ICqvJVQurZXgc
If your Vat Regged
You buy a product for v excluding vat
You add your profit magin v1.3=w
you add ebay/etsy/amazons fees w1.2=x
you add your postage ex vat x+post =y
you add the vat y*1.2=z
Compare z to sale price of competitors
No vat regged
you buy product for v excluding vat
you add vat v1.2=w
you add profit w1.3=x
you add postage x+post=y
you add fees y*1.2=z
compare z to online prices to see if your competitve
If your looking through a lot of products you really ought to have this as a spreadsheet same for marking up your products for sale.
Seller_qZO3ZCjoBXEeL
The answer will somewhat depend on what VAT scheme you are on. Assuming you are on normal VAT accounting (not flat-rate) it is almost always easier to work on ex. VAT numbers. VAT then becomes a cash-flow issue rather than a profitability issue.
You buy your stock for £100 ex. VAT
You sell your stock for £500 ex. VAT
You incur sales/fulfilment fees of £150 ex. VAT
Your gross profit is therefore £500-£100-£150 = £250 (VAT is not a factor at this point)
Your gross profit margin is 50%
From both of these figures you would then deduct your overheads (salary, insurance, IT, non-sales related shipping etc.) to find your net profit.
