MoneyShop money
How to work out your shop's real profit
The cash in your galla is not profit. Count the buy rate, every kharcha, the udhaar you gave out and the stock on your shelf, and reach one real number.
From the galla to real profit in five steps
- 1Add up today's salesCash sales plus everything you handed over on udhaar.
- 2Take off the buy rateWhat those goods cost you, not what you sold them for.
- 3Take off one day of running costsRent, electricity, staff and small cash, split per day.
- 4Note what left on trustUdhaar given today is profit you earned but cannot spend.
- 5Look at the shelfStock is your money resting. Count it once a month.
The money in your galla — the cash drawer — at closing time is not your profit. It is sales, minus what you paid out today, plus whatever old udhaar came back. Real profit is what is left after the buy rate, every expense, the udhaar you handed out, and the stock still sitting on your shelf.
Why the galla lies to you
Ask a shopkeeper what he earned today and he opens the drawer. Rs 9,000 inside feels like Rs 9,000 earned. It is not, and that gap is where a lot of small shops quietly lose a whole year.
The cash in that drawer is a mixture of four unrelated things, and only a thin slice of it is yours.
Most of it is your own money coming back. Sell a bag of atta for Rs 2,700 that cost you Rs 2,450, and only Rs 250 is new money. The other Rs 2,450 is last week's money walking back in through the door.
Some of it is old udhaar being repaid. That was a sale you made in April and already felt good about once.
Some of it is not yours at all. The supplier payment you hand over on Thursday is sitting in that same drawer tonight, and so is the electricity bill.
And part of today's real profit is not in the drawer. It is on the shelf as unsold stock, or in a customer's pocket as fresh udhaar.
Imran runs a general store in a Multan mohalla. Two days last month both ended with exactly Rs 9,000 in the galla, so he assumed they were twins.
Two days, the same Rs 9,000 in the drawer
Monday was a plain cash day. Tuesday looked identical at shutter time, but Tuesday sold Rs 2,000 more, gave out Rs 5,000 of udhaar, and pulled in Rs 3,500 of old money. Same drawer, different business. If Imran judges his week by the galla, he will never learn which kind of day he should want more of.
Four things hide between a sale and real profit
The buy rate. Every rupee of sale carries a cost that came before it. Two items on the same shelf, both priced at Rs 500, can leave you Rs 120 and Rs 15. Sell only the second one all day and the drawer still looks wonderful.
The running costs. Rent, electricity and salary do not arrive daily, so they do not feel daily. They are. A Rs 25,000 rent is Rs 833 of every single day, whether or not the landlord came.
The udhaar you gave. Goods left the shelf, so the sale is real and the profit is real. The cash is not here. Hand out Rs 5,000 a day for a month and Rs 150,000 of your working money is standing outside the shop.
The stock still sitting there. Money spent on goods is neither gone nor earned. It is parked. A shop that buys carefully can show a thin drawer and a healthy business. A shop that over-buys shows a fat drawer for a week and no cash by the 20th.
Count the costs nobody counts
Rent and salary are easy to remember, because somebody comes and asks for them. The dangerous expenses are the small ones that leave in cash and are never written anywhere.
The costs that never reach the total
- Shop rent, split into a daily share
- Electricity, gas and the generator's fuel
- Helper's salary, and his chai and lunch
- Rickshaw, loader and petrol on pickups
- Shoppers, tape, paper and packing
- Breakage, expiry and goods gone bad
- Phone balance, internet, card machine cut
- Repairs: fridge, shutter, fan, freezer
- Money you take home, written down every time
- Old udhaar you have quietly stopped chasing
Two lines on that list deserve a sentence each.
Breakage and expiry are real money. The bottle that fell, the biscuits that went stale, the milk pack you gave the child for free: nobody sends you a bill for those, so most shopkeepers never subtract them. Keep a cheap notebook by the counter and write the cost price of anything that dies. At month end that page is often larger than the electricity bill.
The money you take home is not a shop expense, and that is exactly why it must be written down. It is profit being spent. If it leaves the drawer without a line anywhere, you will look at a thin galla on the 25th and blame your sales, when the truth is that Rs 22,000 walked home in Rs 500 pieces.
One day, worked out from top to bottom
Here is the whole calculation, done for a single day. Do it once for a real day of your own and it stops feeling like accounting.
Suppose: one Saturday at a general store
An example day, not real shop data. Put your own four numbers on the same four lines.
Where does the Rs 1,850 middle line come from? Add your fixed monthly costs and divide by the days you open. Rent Rs 25,000, electricity Rs 9,000, one helper at Rs 20,000, internet and phone Rs 1,500. That is Rs 55,500 a month, and on 30 open days it is Rs 1,850 a day. You work that number out once, write it on a card, and reuse it every day for the next six months.
The top line is the one people get wrong. Sales means everything that left the shelf today, cash and udhaar together. It does not mean what landed in the drawer. Old udhaar that came back is not a sale today; it was a sale months ago, and counting it again is how a bad month gets mistaken for a good one.
The second line is the one people skip, because it needs buy rates. You do not need perfect ones. Start with your ten fastest-moving items, write the buy rate beside each on a card, and estimate the rest at your normal margin. A rough working-out done every week is worth far more than a perfect one done never.
Udhaar looks like a loss today and profit later
The day you give Rs 5,000 of goods on udhaar, your drawer is Rs 5,000 lighter and your shelf is lighter too. Nothing came in. It feels like the worst day of the week.
It was not. You earned your margin the moment the goods left, say Rs 900 of it. What you lost was the use of Rs 4,100 of your own money until he pays. That is the honest way to see udhaar: the profit is booked today, the cash is a loan you made without meaning to.
This is why two numbers must live apart in your head. Profit tells you whether the shop works. Cash tells you whether you can pay your supplier on Thursday. A shop can be profitable and still be unable to pay a bill, and that is the moment most shopkeepers panic and assume the business is failing when the real problem is that Rs 200,000 is out in the mohalla. If a lot of yours is stuck out there, the steps for getting udhaar back matter more to your cash than any price increase.
One rule keeps this from getting out of hand: never let your total outstanding udhaar grow larger than one month of purchases. Past that line, you are financing your customers with your supplier's money.
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Stock is money lying down
Farah sells cosmetics and small gifts in Rawalpindi. Her sales grew all year, her profit calculation looked healthy, and by December she could not pay her supplier. Nothing was wrong with her margins. She had Rs 340,000 of stock on shelves, and about Rs 120,000 of it had not moved in six months.
Every unsold box is a rupee that already left your pocket. Count the shelf once a month at buy rate, not sale price, and watch the total. If sales stay flat and the stock number keeps climbing, you are buying faster than you sell, and the profit you calculated is quietly turning into cartons. Keeping stock at the right level is the cheapest cash you will ever raise, because the money is already yours.
Sunday, not Eid
Most shopkeepers work their profit out once a year, usually when something goes wrong. By then the year is spent and nothing can be changed.
Give it twenty minutes every Sunday instead. Four lines for the week: sales, buy rate of what sold, costs, and the profit that is left. Then two more: total udhaar outstanding today, and stock at buy rate. Write all six in the same notebook, one row per week, and by the sixth week the rows start talking. You will see the week you bought too much, the week udhaar jumped, the week your margin slipped because you kept giving old rates on new stock.
Doing it by hand works. Doing it with a ledger that already knows your buy rates, expenses and outstanding udhaar takes about a minute. Wasoolo keeps sale, buy rate, costs and khata balances in one place and shows the profit for any date range, and you can see how it works or download it free before deciding anything.
The two numbers on the wall
If you keep nothing else, keep these two, updated every week on a piece of paper taped near your counter.
Profit per day. The one from the box above. It tells you whether your shop earns a living. Watch its direction over eight weeks, not its value on any one day.
Money outside the shop. Total udhaar plus stock at buy rate. This is your own cash that you cannot spend today. When this number rises for three weeks while profit stays flat, you are heading for a tight month, and you can act while there is still time.
A shopkeeper who knows those two numbers on a Sunday evening makes better decisions all week: what to buy, whose udhaar to chase, when to say "let us clear the old balance first".
Common questions
Is the cash in my galla ever equal to my profit?
Almost never. The drawer holds your own money returning, old udhaar being repaid, and cash you owe others, while part of today's profit is sitting on the shelf or in a customer's pocket. Treat the galla as a cash check at closing time, and work profit out separately.
I do not know the buy rate of half my items. Where do I start?
Start with the ten items you sell most. Write the buy rate beside each one on a card taped inside a cupboard, and update it whenever the supplier changes. Those ten usually cover most of your sales, so your profit figure gets close very quickly. Add ten more next month.
Should I count the money I take home as an expense?
Not as a shop expense, but always write it down. That money is profit leaving, not a cost of running the shop. Keeping a separate line for it stops you from spending the same profit twice and shows you honestly how much the shop supports the house.
How often should I do this?
Once a week is the sweet spot. Daily gets abandoned by the third week, and yearly is too late to change anything. Twenty minutes on a Sunday gives you six figures that you can compare with last Sunday, and comparison is where the value is.
My profit looks good but I have no cash. What is wrong?
Your money is usually in two places: udhaar you have not collected and stock you have not sold. Add both, and compare that total with one month of purchases. If it is larger, slow down your buying and put a real week of work into recovery before you blame the margins.
Do I have to charge more to make more profit?
Not usually. Most small shops find profit faster by cutting the leaks: dead stock, breakage, unrecovered udhaar and the small cash that leaves unwritten. Fixing those changes nothing your customers can see, which is why it is the safer place to start.
Not sure how to work out a first profit figure for your own shop? Send us a message with how you keep your records today, and we will show you the shortest way to that one number.