how to show profit on an invoice

the_pen_turner

what is the best way to show profit on an invoice
I usually just add a percentage but it gets complicated adding in in hidden. I usually list materials(altogether ) labour, and other costs(skips, waste removal, porta loo etc)
if I just list it beside the materials and labour then customers will complain.

how do you deal with this

Trojan

"how to show profit on an invoice" - I wouldn't.

There are certain things people don't want to see on an invoice, but that you still need to factor into your pricing: the cost of the sales process, meetings, calls, failed sales pitches, etc, and profit is one of them.

The more detail you include, the more nitpicking you open yourself up to, particularly if dealing with non-business customers.

Bandara

seconded

The profit is your business, on one elses, all that will come out of showing it is grief

For example, a panel beater might charge you €300 to tap out a big dent in your car. His 'profit' ex vat is €230 or some such. So your going to go mental etc.

In reality his profit is 230, less the huge overheads, and the 5 years training and 10 years experience to know where and how to tap in order to get that panel fixed. You can't list that on an invoice !

the_pen_turner

I agree.
what is the best way to 'hide' it.
do you just add some of it to your material mark up and extra to your labour rate.

the problem is that this then makes your labour look more than it actually is

Bandara

tbh I wouldn't hide it, or try to hide it.

The price is the price, the customer will never like what you write regardless.

List your project price, break it down in generic lumps if requested to, Equipment, Labour, sundries etc.

Essentially its the overall price that the client cares about. They will try to beat you down on your labour cost in comparison to your competitor, you might be 10k, they are 9k, but the client won't mention to you that your equipment cost of 15k is two grand cheaper than the competitions 17k, meaning you are cheaper overall by 1000.

Price you job to the margins that you have determined you need to make for the company to be sufficiently profitable for you, add ten 10% across the board to this price and then you have 5% immediate wiggle room when pressed by the customer, and if the gun is really put to your head you can go the extra 5% as well to get the deal, your still making full margin and if you don't have to discount the full 10% then your well ahead.

Customers don't decide the price, you do. They decide what they will pay. The answer is always in the middle somewhere, protect yourself against being exposed in that middle and you'll do well.

barneystinson

I feel like I have just wandered into the twilight zone...

I just can't even...

the_pen_turner

Bandara wrote: »

tbh I wouldn't hide it, or try to hide it.

The price is the price, the customer will never like what you write regardless.

List your project price, break it down in generic lumps if requested to, Equipment, Labour, sundries etc.

Essentially its the overall price that the client cares about. They will try to beat you down on your labour cost in comparison to your competitor, you might be 10k, they are 9k, but the client won't mention to you that your equipment cost of 15k is two grand cheaper than the competitions 17k, meaning you are cheaper overall by 1000.

Price you job to the margins that you have determined you need to make for the company to be sufficiently profitable for you, add ten 10% across the board to this price and then you have 5% immediate wiggle room when pressed by the customer, and if the gun is really put to your head you can go the extra 5% as well to get the deal, your still making full margin and if you don't have to discount the full 10% then your well ahead.

Customers don't decide the price, you do. They decide what they will pay. The answer is always in the middle somewhere, protect yourself against being exposed in that middle and you'll do well.

slightly off topic but a good general principle
that's a good way to put it. I know a few lads that don't understand this. they try to price the job to what the customer will pay and not price it properly and then see if the customer will pay it

rolion

I think you mistake labour with profit,which in very few cases is same amount !

You can do it in two ways:
-one overall invoice line "goods and services" and charge based on VAT
2/3rd rules,either at 23% or at 13.5%.

-one invoice with two lines,one line for materials at 23% and second line with pre-agreed labour/install charges with customer at 13.5%

As above post said,customer no need to know your profit but rather HIS overall cost to match his budget, estimation, expectation and possible other quotes.If he query your charge,drop something as a favour OR run away than working for free,or even worse for the revenue man.

Anyway,I wish you good luck!

smash

the_pen_turner wrote: »

if I just list it beside the materials and labour then customers will complain.

Your profit should come from your labour rate.

the_pen_turner

rolion wrote: »

I think you mistake labour with profit,which in very few cases is same amount !

You can do it in two ways:
-one overall invoice line "goods and services" and charge based on VAT
2/3rd rules,either at 23% or at 13.5%.

-one invoice with two lines,one line for materials at 23% and second line with pre-agreed labour/install charges with customer at 13.5%

As above post said,customer no need to know your profit but rather HIS overall cost to match his budget, estimation, expectation and possible other quotes.If he query your charge,drop something as a favour OR run away than working for free,or even worse for the revenue man.

Anyway,I wish you good luck!

basically what I charge is
(materials +mark up)
labour
other costs (hire of machinery , tolls, parking, etc)not sure if this should be under materials or labour but I rather keep it separate.
then profit

sub total plus % profit plus vat at what ever % it works out to be


what I really need to do is
(materials+markup) x profit
+labour profit
+other costs x profit

total x vat

the_pen_turner

smash wrote: »

Your profit should come from your labour rate.

why

if my job is to fit a 1000euro item supplied and I charge 100 euro to fit it.
if I at 10% profit you are saying I should charge 1110 euro plus vat


to me it should be 1210 plus vat (1100x 110%)

mrawkward

Think car service invoice, they list parts at retail price but have 20-50% markup on their cost, The mechanic gets paid for €15-20/hr but they charge up to 140/hr. QED!

dudara

As mrawkward said, the prices you charge, or the labour rates you charge, should include a mark-up to give you profit.

For example, let's say that you've worked out that the internal cost of labour for your business is €50/hr (including salary, PRSI, pension, training costs, overheads etc). Mark it up by, say 50%, and charge €75/hr to the customer.

You can't list profit on an invoice for several reasons, the first of which is that it's not a good, service or shipping charge. Secondly, it's internal to your business, and not relevant to external parties such as customers.

smash

the_pen_turner wrote: »

why

if my job is to fit a 1000euro item supplied and I charge 100 euro to fit it.
if I at 10% profit you are saying I should charge 1110 euro plus vat

to me it should be 1210 plus vat (1100x 110%)

You should have a markup on the €1000 item and charge an hourly rate to fit it.

the_pen_turner

smash wrote: »

You should have a markup on the €1000 item and charge an hourly rate to fit it.

i don't consider mark up and profit to be the same thing

barneystinson

the_pen_turner wrote: »

i don't consider mark up and profit to be the same thing

So when a shopkeeper buys a can of coke for 30c and MARKS IT UP to a selling price of €1, how much do you consider is his profit?

the_pen_turner

barneystinson wrote: »

So when a shopkeeper buys a can of coke for 30c and MARKS IT UP to a selling price of €1, how much do you consider is his profit?

it is slightly different in a retail situation. all the overheads and labour have to come out of the mark up.

in a service business my overheads and labour are separate from my materials.

the mark up on the materials isn't there to create profit. it is there to cover faulty materials and call backs ,warranty issues.
that money should be left there in the business to cover these costs if they happen

bmwguy

the_pen_turner wrote: »

it is slightly different in a retail situation. all the overheads and labour have to come out of the mark up.

in a service business my overheads and labour are separate from my materials.

the mark up on the materials isn't there to create profit. it is there to cover faulty materials and call backs ,warranty issues.
that money should be left there in the business to cover these costs if they happen

Mark up is to generate profit, it's the primary function of mark up.

If we supply and fit a product that costs us 500 to buy in we will mark up that product by 50% and charge the customer 750 for it.

Profit on the materials is 250.

We also charge labour at 80 Euro per hour, making more profit.

endacl

the_pen_turner wrote: »

what is the best way to show profit on an invoice
I usually just add a percentage but it gets complicated adding in in hidden. I usually list materials(altogether ) labour, and other costs(skips, waste removal, porta loo etc)
if I just list it beside the materials and labour then customers will complain.

how do you deal with this

I generally add several :D:D

the_pen_turner

bmwguy wrote: »

Mark up is to generate profit, it's the primary function of mark up.

If we supply and fit a product that costs us 500 to buy in we will mark up that product by 50% and charge the customer 750 for it.

Profit on the materials is 250.

We also charge labour at 80 Euro per hour, making more profit.

the primary function of mark up is NOT to generate profit. it is to cover the cost of doing business

in your example you have forgotten all the costs . your profit is really only 50 euro if that much

barneystinson

the_pen_turner wrote: »

it is slightly different in a retail situation. all the overheads and labour have to come out of the mark up.

in a service business my overheads and labour are separate from my materials.

the mark up on the materials isn't there to create profit. it is there to cover faulty materials and call backs ,warranty issues.
that money should be left there in the business to cover these costs if they happen

Jaysus wept. I'm really starting to hope for your sake that you're a student or something...

Mark up can cover many things, but fundamentally its purpose is to be sufficient so as to generate profit. https://en.m.wikipedia.org/wiki/Markup_(business) "markup is added onto the total cost incurred by the producer of a good or service in order to cover the costs of doing business and create a profit."

bmwguy

the_pen_turner wrote: »

the primary function of mark up is NOT to generate profit. it is to cover the cost of doing business

in your example you have forgotten all the costs . your profit is really only 50 euro if that much

You are completely lost or you are trolling, I am not sure which. Even your original question was bizarre, you wanted to show your profit on an invoice. This doesn't happen anywhere, nobody does this.

I'm not sure you know what profit is to be honest. Or mark up. You have everyone baffled on this thread.

Trojan

I think this could be an issue of semantics and industry specific terminology for the OP.

In my industry (online marketing/business consulting) some people do bill on a time and materials basis, but I think that a lot of people - or at least the smarter ones - have moved to a different pricing structure, e.g. value-based pricing (read Alan Weiss to learn more about that).

I think both the title and the content of this article are relevant to the OP's situation:"Markup isn't profit, or how much should a contractor charge?"

the_pen_turner

bmwguy wrote: »

You are completely lost or you are trolling, I am not sure which. Even your original question was bizarre, you wanted to show your profit on an invoice. This doesn't happen anywhere, nobody does this.

I'm not sure you know what profit is to be honest. Or mark up. You have everyone baffled on this thread.

trust me im not trolling. to even suggest that is very ignorant of you.
when I say show profit on an invoice I don't mean just materials are x labour is y and profit is z. that would be stupid. hence my question on how do you put it in with out blatantly showing it. although on some American forums I see contractors doing that

in many online forums and web pages (trade related mostly)I have read I have yet to see profit generated through the mark up.

the shop example is very different to my situation being a tradesman. I can directly charge my time (with overhead included).
mark up in my situation is there to cover the cost of getting the materials (if it cant be charged) keeping the materials, and servicing or replacing materials that fail under my warranty . if I hang a door for someone , the mark up on the materials covers my time if the hardware fails and I have to replace it. Im not going to get any money from the customer for the time and new hardware

it is your profit margin that generates the profit. I charge a percentage across the board on material and labour.
only adding profit to labour is stupid

the_pen_turner

Trojan wrote: »

I think this could be an issue of semantics and industry specific terminology for the OP.

In my industry (online marketing/business consulting) some people do bill on a time and materials basis, but I think that a lot of people - or at least the smarter ones - have moved to a different pricing structure, e.g. value-based pricing (read Alan Weiss to learn more about that).

I think both the title and the content of this article are relevant to the OP's situation:"Markup isn't profit, or how much should a contractor charge?"

I think u re right . its a problem of language and industry differences.
what works in one sector doesn't make sense in another.
you are right I am talking about a time and material system of pricing.

I will look into value based pricing

barneystinson

the_pen_turner wrote: »

I think u re right . its a problem of language and industry differences.
what works in one sector doesn't make sense in another.
you are right I am talking about a time and material system of pricing.

I will look into value based pricing

Good luck implementing that as a tradesman...

the_pen_turner

barneystinson wrote: »

Good luck implementing that as a tradesman...

just read an overview on yer mans website.
how the hell does he think this is a good system. its ok for big consultants like him who can charge what they like.

if I did that I would never work again.

smash

the_pen_turner wrote: »

in many online forums and web pages (trade related mostly)I have read I have yet to see profit generated through the mark up.

That's because people don't advertise what their mark up or profit is. You see a price and that's it.

the_pen_turner

smash wrote: »

That's because people don't advertise what their mark up or profit is. You see a price and that's it.

sorry I meant websites and forums discussing business related stuff like mark up and profit. most of them are trade related

Trojan

One resource folks here might find useful or interesting [edit: but only if you don't mind explicit language] is this guy. Has some great videos on pricing. He's in laptop repair but has business advice that's applicable to many industries.

gargargar

This is a weird question as it is framed. I received a number of quotes for an extension recently. None of them showed me the profit they were making. They were all differing amounts but they boiled down to something like:

Labour 10k
Materials 30k
VAT 5K

Total 45K

As a consumer I had no idea what they were paying for the materials or the labour.

I presume in their office their project budget would have read:

Labour 7K
Materials 26k

Total 33K (Net VAT)

Customer Charge 40k

Profit 7K

So really your question should be "How do I break an invoice down while still hiding my markup?" maybe?

Trojan

I know value based pricing would be a tough sell in that industry, but there is a segment of customers who are willing to pay above market rates for a better service.

You can be the cheapest, or the best, but you really don't want to be somewhere in between (I'm thinking of Tesco's recent results). If I was OP I'd be looking to try to differentiate as much as possible so that the conversation is not about price.

Pricing is a fascinating topic.