Purchase price and selling price: you need both columns

In many shopkeepers' tables there is a single column for price: what the item costs. That is the selling price, the number on the shelf tag. Daily and monthly takings are built from these numbers, so everything seems fine. But takings are not profit. To know your profit, the table needs a second column: what you paid for the item.

Two prices, two questions

The selling price answers "How much do I sell this for?" The purchase price answers "How much did it cost me?" Subtract one from the other and you see how much money is left from each unit.

For example, you bought a box of pens at the wholesale market for 8,000 so'm each and you sell them from the shelf at 11,000. The first column holds 8,000 and the second 11,000. The difference is 3,000 so'm: that is what you earn on each pen sold, before transport, rent and other costs.

What happens with only one column

A table with only the selling price cannot answer three important questions.

• How much profit is there? You know the takings but not how much of them went on the goods themselves.
• How much money sits in stock? 120 pens at selling price are worth 1,320,000 so'm, yet you paid 960,000 for them. When deciding how much more to buy, the purchase amount is what counts.
• How big a discount can I give? If a discount goes beyond your markup, every sale makes a loss, but without a purchase price column you will not notice.

Which columns to add

It is useful to add two calculated columns to the two price columns:

• Profit (so'm) = selling price − purchase price;
• Stock value = quantity in stock × purchase price.

Calculate them in Excel with formulas rather than typing them in. The profit column shows which items earn the least, and the stock value column gives you the total money tied up in goods as a single number: just add up the column.

A small example. The table has three lines: pens (120 pieces, 8,000 and 11,000 so'm), notebooks (60 pieces, 5,000 and 7,000 so'm) and pencils (200 pieces, 1,500 and 2,500 so'm). Stock value: 960,000 + 300,000 + 300,000 = 1,560,000 so'm. If everything sells, takings will be 1,320,000 + 420,000 + 500,000 = 2,240,000 so'm, so the possible profit is 680,000 so'm. Pencils leave only 1,000 so'm per piece, but there are 200 of them, so they bring 200,000 so'm, while notebooks, at 120,000 so'm, earn the least. You can only draw such a conclusion when the table holds both prices.

When the purchase price keeps changing

A supplier raises prices, or the exchange rate shifts and imported goods get dearer. The simplest approach is to replace the purchase price in the table with the price of the latest batch and keep the old one in a note. A more precise way is to keep each batch on its own line or to calculate an average price. For a small shop the first method is enough: what matters is that the price in the table does not drift far from your real cost.

The purchase price includes not only the goods themselves but also the costs attached to them: transport, unloading and, where it applies, customs. We have a separate article on that; for now remember that your cost is often slightly higher than the figure on the invoice.

The most common mistakes

• The purchase price is kept in memory and never written in the table.
• Units get mixed in the columns: the purchase price is for a box and the selling price for a single piece.
• A promotional price is typed over the normal one and the old price is lost.
• The price quietly changes but nobody updates the table.

Conclusion

Two price columns look like a trifle, but they teach you to think about profit instead of takings. If you add purchase prices to all your goods in a single day, your records become noticeably more reliable. If the prices in your table are in a muddle, AniqHisob can check them during a stock count and help restore your records.