Key points
- Gross profit = sales − COGS. Net profit = gross profit − operating costs such as rent, wages, electricity, and app subscriptions.
- You still pay operating costs in slow months, so the same gross margin can mean a profit in a busy month and a loss in a slow one.
- Monthly break-even = operating costs ÷ gross margin. Divide by the days you're open for a daily target.
- Check sales, COGS, and gross profit in your reports every week, and check net profit every month once all operating costs are recorded.
Picture this: your report for the month shows a gross profit of Rp21,600,000. It sounds like a lot. But once rent, wages, and the electricity bill are paid, far less is left. In a slow month, you might even end up below zero.
That gap is the difference between gross profit and net profit. Gross profit tells you whether your menu prices cover your ingredients. Net profit tells you whether your business actually makes money. You need both.
Example: Every number in this article is an example for one small cafe, not data from a real business. Swap in your own numbers.
Gross profit: sales minus COGS
The formulas:
- Gross profit = sales − COGS
- Gross margin = gross profit ÷ sales × 100%
Sales here means sales before tax. The tax your customers pay goes to the government later, so it isn't income for your business.
COGS (cost of goods sold) is what you spent on ingredients and packaging for the items you sold. If you've never worked out COGS per menu item, start with the guide to calculating COGS per menu item.
Gross profit answers one question: once the ingredients are paid for, how much is left for other costs and for you? It doesn't tell you whether your business is profitable, because rent, wages, and bills aren't counted yet.
Net profit: after operating costs
The formula:
- Net profit = gross profit − operating costs
Operating costs are the costs of running the business that don't belong to any one serving:
- Rent
- Staff wages and meal allowances
- Electricity and water
- Gas
- Internet
- Packaging and supplies that aren't in your COGS, such as bags, tissues, and dish soap
- Equipment maintenance and servicing
- App subscriptions, including your POS app
Two costs that are easy to miss:
- Your own pay, if you work at the outlet. Leave it out and your net profit looks bigger than it really is.
- Costs you pay once a year, such as annual rent or a major service on your espresso machine. Divide by 12 and add that to each month's costs.
Note: Net profit in this article is before any tax on your business income. Check the tax rules that apply to your business with a tax consultant or your local tax office.
A worked example for one month
First, the monthly operating costs:
| Monthly operating costs | Amount |
|---|
| Rent | Rp5,000,000 |
| Wages, including your own pay | Rp7,000,000 |
| Electricity and water | Rp1,200,000 |
| Gas | Rp400,000 |
| Internet | Rp350,000 |
| Packaging and supplies outside COGS | Rp300,000 |
| Equipment maintenance | Rp500,000 |
| POS app (Kazeer Standard Monthly) | Rp250,000 |
| Total | Rp15,000,000 |
The POS app row is the cost for one outlet, since Kazeer plan prices are per outlet. If you use the Kazeer Free plan, that row is Rp0, and a Rp500 platform fee per transaction is paid by the customer. For a comparison of the two, read the article on choosing a plan.
Now compare two months: a busy one and a slow one. The gross margin is the same in both, 60%, and so are the operating costs.
| Busy month | Slow month |
|---|
| Sales (before tax) | Rp36,000,000 | Rp22,000,000 |
|---|
| COGS (40% of sales) | Rp14,400,000 | Rp8,800,000 |
|---|
| Gross profit | Rp21,600,000 | Rp13,200,000 |
|---|
| Operating costs | Rp15,000,000 | Rp15,000,000 |
|---|
| Net profit | Rp6,600,000 | loss of Rp1,800,000 |
|---|
How to read the busy month: Rp36,000,000 − Rp14,400,000 = Rp21,600,000 in gross profit. After operating costs, Rp21,600,000 − Rp15,000,000 = Rp6,600,000 in net profit. That's about 18.3% of sales.
In the slow month, gross profit is Rp13,200,000, while operating costs stay at Rp15,000,000. The result is a loss of Rp1,800,000, even though the menu prices and recipes haven't changed.
Why a healthy gross margin can still mean a loss
Ingredient costs go up and down with your sales. Most operating costs don't. You pay rent and wages whether you're busy or quiet. So there's a level of sales you have to pass before you make a profit. That level is your break-even point:
- Minimum monthly sales = operating costs ÷ gross margin
From the example: Rp15,000,000 ÷ 0.6 = Rp25,000,000 a month. If the outlet is open 25 days a month, that's Rp1,000,000 a day. The slow month's sales of Rp22,000,000 fall below that line, so the month ends in a loss.
Three other things can make net profit smaller than you expect:
- Operating costs go up without sales following. Rent rises, you add staff, or the electricity bill grows because of new equipment.
- Wasted ingredients. COGS worked out from sales only covers the items you sold. Ingredients that expire, spill, or get thrown away are still paid for when you buy them, unless you've already built waste into your COGS per item.
- Promotions and discounts. Customers pay less while the ingredients cost the same. For how to cost a promotion that still pays, read the article on slow-hour promotions.
To check for wasted ingredients, compare what you used in rupiah with the COGS in your reports:
Example: Your ingredient stock is worth Rp3,000,000 at the start of the month, you buy Rp15,200,000 of ingredients during the month, and your stock is worth Rp3,200,000 at the end. What you really used is Rp3,000,000 + Rp15,200,000 − Rp3,200,000 = Rp15,000,000. The COGS in your report is Rp14,400,000. The Rp600,000 difference is ingredients you used that never made it into COGS, such as waste or spoilage, so the busy month's real net profit was Rp6,000,000.
Stock value is the quantity in stock times its purchase price. For ways to cut wasted ingredients, read the article on ingredient waste.
What to check every week and every month
Sales, COGS, and gross profit move every day, so check them every week. Most operating costs come once a month, so check net profit every month, once all of that month's costs are recorded.
In Kazeer, you can set up both VAT (PPN) and regional tax (pajak daerah), and COGS and tax are recorded from every sale. Reports show sales, COGS, gross profit, and tax, for each outlet and in one report for all outlets. See an example in the reports section. Operating costs like rent, wages, and electricity don't come from sales, but you can record them in Kazeer, and the report shows your net profit: gross profit minus those operating costs.
Every week:
- Average sales per day. Compare it with your daily break-even point, Rp1,000,000 in the example.
- COGS percentage, which is COGS divided by sales. If it goes up while your menu prices stay the same, check your latest ingredient prices and the amounts used at the bar or in the kitchen.
- Gross profit, compared with the weeks before.
Every month:
- Make sure all of the month's operating costs are recorded in Kazeer, from receipts, bills, and transfer records.
- Check net profit in your reports: gross profit minus the operating costs you recorded.
- Compare ingredient use with the COGS in your reports to see what was wasted.
- Recalculate your break-even point if any cost has changed.
If you run more than one outlet, work out net profit for each. Take each outlet's gross profit from your reports, then subtract that outlet's own costs, such as its rent, its staff wages, and its Kazeer subscription. Split shared costs, such as your own pay, across all outlets. That shows you which outlets cover their own costs.
Steps for this month
- Gather last month's operating costs. Include your own pay and the monthly share of annual costs.
- Take last month's sales, COGS, and gross profit from your reports.
- Work out net profit: gross profit minus operating costs.
- Work out your break-even point: operating costs divided by gross margin, then divided by the number of days you're open.
- Put your daily break-even number somewhere you see every day, and compare it with your sales every week.
- At the end of the month, value your stock and compare ingredient use with the COGS in your reports.