What does commercial margin mean?. The commercial margin is what is left from a product sales in other words that part of the selling price which covers our business costs and which represents the net profit in percentage.
It’s not so easy to understand, is it?. To make easier: the commercial margin is the difference between the selling price and the purchase cost.
And what about the VAT?. You have to take it out.
So the magin in euros derives from:
(Selling price-VAT)-(Purchase Price-VAT) or more simply (Selling taxable income) – (Purchase taxable income).
This is how we get the so called brokerage margin. To obtain the margin in percentage I have to divide the result by the selling taxable income and multiply by 100.
I am a bike seller and I sell a woman bike for 500 euro. The bike was issued to me for 500 euros. How much margin did I get from the selling?.
Don’t say: 100 euros because the VAT has to be considered. It is wrong just to calculate 500 euros – 400 euros!.
Actually I cashed in 409,84 euros + VAT and paid 327,87 + VAT so that since the VAT difference has to be paid to the system, the margin I get is 409,84-327,87= 81,97 euro.
The percentage margin is (409,84-327,87)/409,84)*100=20 %.
You can see that even when I calculate 500-400 I get a 20% result but this is the wrong way to make calculation and sometimes it doesn’t happen: eg. when the purchase VAT and the selling VAT are different percentage.
No way, a calculator won’t be enough, you may need paper and pencil! What a shame!
That’s what M&R app is for! Both M&R free and M&R professional
It’s very easy: insert 400 euros in the purchase list (the VAT value will be the one you selected in the settings) and 500 euros in the selling field, that’s all! You will get a 20% margin in other words 81,97 euros.
If you start using the free M&R app you won’t do without the professional one!.