Calculating the monthly net income percentage of gross revenue is an indicator of success to business owners. Net income is the amount of profit after the expenses of running the business have been subtracted. Having a large volume of sales and brisk movement of product doesn't always translate to profitability if your costs are too high. Therefore, properly analyzing your total monthly net income in comparison to gross receipts will tell you if you are pricing your products and services correctly, and if future growth can be sustained.
Add up your monthly receipts. This will represent your total revenue. All money received in a month from sales and other sources should be included.
Subtract the monthly costs of goods sold from the total revenue. This will give you the gross profit.
Calculate operating expenses by adding the monthly costs to run the business. Include employee expenses, lease payments and building operating expenses. Depreciation of equipment, real estate, vehicles and other capital items also are considered to be operating expenses.
Find the monthly cost of business debt interest and taxes paid.
Subtract the monthly total operating expenses, interest paid and taxes from the monthly gross profit. This will give you the company's monthly net income.
Divide the monthly net income by the monthly total revenue to obtain the net income percentage of gross receipts. For example, if the net income is $10,000 and the total revenue $100,000, then the percentage is 10 percent (10,000/100,000=.1).
References
Writer Bio
Carol Deeb has been an editor and writer since 1988. Her work has appeared in magazines, newspapers and online publications, as well as a book on education. Deeb is a real-estate investor and business owner with professional experience in human resources. She holds a Bachelor of Arts in English from San Diego State University.