1. Know which profit margin you are calculating
Higher sales do not automatically mean a healthier business. A useful monthly profit analysis separates what you sold, what delivery cost and what remained after running the business. Profit is a money amount; profit margin expresses that amount as a percentage of revenue.
| Measure | Simplified calculation | What it helps explain |
|---|---|---|
| Gross profit | Net revenue − cost of goods sold | What remains after delivering the products or services sold |
| Operating profit | Gross profit − operating expenses | Results from operations before interest and income tax |
| Net profit | Operating profit − interest expense − income tax expense | What remains after these additional costs |
| Each profit margin | Relevant profit ÷ net revenue × 100 | Profit retained per dollar of net revenue |
These net-profit formulas assume no interest income or other non-operating gains or losses. Include those items when present. Net revenue means sales after returns and discounts. If revenue is zero, the margin calculation is undefined; display that clearly rather than inventing a percentage.
2. Prepare monthly sales and expense data
Start with a consistent accounting report, using the same currency and accounting basis each month. Keep actual figures separate from estimates. A monthly summary should identify the period, net revenue, cost of goods sold, operating expense categories, interest and income tax where applicable.
- Use one category for each cost and count it once. Avoid including supplier costs in both COGS and general expenses.
- Separate advertising, software, rent and administration so changes remain visible.
- Match costs to the reporting period consistently; do not compare a full month with a partial month.
- Check the totals against the source report before importing. Keep notes for refunds, corrections and unusual items.
3. Calculate gross and net profit: a worked example
The following fictional service business illustrates the arithmetic in US dollars. Operating expenses include all operating costs and any applicable depreciation. There are no other gains or losses. Interest and income tax are separate illustrative amounts, not recommended tax rates or estimates for a real business.
| Monthly figure | Month A | Month B |
|---|---|---|
| Net revenue | $20,000 | $22,000 |
| Cost of goods/services sold | $8,000 | $9,900 |
| Gross profit | $12,000 | $12,100 |
| Operating expenses | $8,000 | $8,500 |
| Operating profit | $4,000 | $3,600 |
| Interest expense | $400 | $400 |
| Profit before income tax | $3,600 | $3,200 |
| Income tax expense | $900 | $800 |
| Net profit | $2,700 | $2,400 |
| Gross margin | 60.00% | 55.00% |
| Operating margin | 20.00% | 16.36% |
| Net margin | 13.50% | 10.91% |
For Month A, gross margin is $12,000 ÷ $20,000 × 100 = 60%. Net margin is $2,700 ÷ $20,000 × 100 = 13.5%. Those answers describe different layers of profitability; neither should replace the other.
4. Find what changed before deciding what to cut
In the example, revenue increased 10%, yet net profit fell by $300. COGS absorbed more of each sales dollar: gross margin dropped five percentage points. Gross profit rose only $100, while operating expenses rose $500, reducing operating profit by $400.
Investigate the underlying rows. Did supplier prices rise, discounts increase or the sales mix shift toward lower-margin services? Within operating expenses, identify the categories responsible for the $500 increase. A temporary setup cost and a recurring subscription need different follow-up. A larger cost is not automatically waste if it supports valuable delivery or future capacity.
5. Start with the Richzi sample report
Richzi’s public site offers a sample report without signup and an upload path for monthly CSV or Excel sales and cost files. Start with the sample to understand the presentation before introducing your own records.
- Open the sample and identify revenue, gross profit, net profit and the expense categories used.
- Prepare a copy of your monthly summary with clear column headings and no unnecessary personal details.
- Use the spreadsheet import option and verify how each field is interpreted.
- Recalculate one month independently, then investigate any mismatch before relying on trends.
- Choose one question to review, such as which recurring cost grew faster than sales.
Check what the selected calculator or import actually includes. If interest or another required adjustment has no separate field, keep a supplemental reconciliation. Do not label an incomplete operating result as final net profit. Treat automated explanations as hypotheses to verify against records.
6. Review cash flow separately from profit
A profitable month can still leave little cash available. Under accrual accounting, a completed sale may contribute to revenue before the customer pays. Conversely, collecting an earlier invoice increases cash without creating a new sale for the current month.
Keep a separate view of opening cash, receipts, payments and closing cash. In an illustrative cash-only reconciliation, $5,000 opening cash plus $12,000 received minus $14,000 paid leaves $3,000. That $2,000 cash decrease is not automatically a $2,000 accounting loss.
7. Make the monthly review repeatable
Use the same monthly cutoff, categories and formulas. Record the largest verified change, its likely explanation and one follow-up task with an owner. Next month, check the result alongside seasonality and changes in sales volume. A consistent process makes a dashboard useful; extra charts cannot repair missing or misclassified inputs.
Common questions
What is a good net profit margin for a small business?
There is no universal target. Industry, business model, maturity and accounting classifications change what a margin means. Start with consistent internal comparisons before using comparable industry benchmarks.
Is profit margin the same as markup?
No. Margin divides profit by selling revenue; markup divides the difference between price and cost by cost. A $100 sale with $60 direct cost has a 40% gross margin and about 66.67% markup on that cost.
Can I analyze profit in Richzi without connecting a payment account?
The public site provides a sample-first path and CSV or Excel upload options. Start there and check the current import requirements. This guide does not assume any live payment integration is connected.
Sources & further reading
Product information and references reviewed October 18, 2026. Check the linked sites for current features, availability and terms.