Profitability Report (P&L)

How do I read the Profitability report and what insights can I gain from it?

Valentine Strunz-Happe avatar
Written by Valentine Strunz-Happe
Updated over a week ago

tl;dr

  • One of the foundational ideas of Klar is that we want to empower our customers to not just drive revenue, but profitability.

  • Using the configuration of your costs structure, we can generate an always up to date Profit & Loss statement you use to understand how your margin structure and overall profitability is developing over time.

  • From GMV down to EBITDA. Including deep-dives into discounts, returns, logistics, marketing & more.

  • Obviously this report cannot replace your P&L done by accounting, but our goal is to get this to be 98% accurate so that you can reliably work with it to improve profitability.

Update November 2023:

  • Added overhead costs to see P&L down to EBITDA

  • Added drill-downs of

    • Price Reductions: % of orders with price reductions

    • Discounts: % of orders with discount codes

    • Shipping revenue: % of orders with shipping revenue

    • Returns: Full return rate, partial return rate, order cancelled rate, order partial cancelled rate, items return rate

    • Net Revenue: first time customer revenue rate & net revenue, repeat customer revenue rate & net revenue

    • COGS: sold items, replacement items

    • Logistics costs: general costs, shipping costs, packaging costs, picking costs, return costs, new customer costs, other costs

    • Marketing costs: MER, aMER, new customers, CAC, performance/brand/other marketing

    • Overhead costs: type of costs like agency, rent, salary, software, operations, other

What can I analyse:

The dashboard is divided into two different sections. An overview and a detailed Profit & Loss statement.

Overview

The overview focuses on your core four profitability metrics:

  1. Net Revenue = Revenue excluding discounts, returns and taxes

  2. Contribution Margin 1 = Net Revenue - Cost of Goods Sold

  3. Contribution Margin 2 = Net Revenue - COGS - Logistic Costs - Transaction Costs

  4. Contribution Margin 3 = Net Revenue - COGS - Logistic Costs - Transaction Costs - Marketing Costs -> CM3 is your profit after deducting all variable costs

The are being shown as a total for the selected time period as well as displayed in weekly total in a graph so you can see how they have developed over time.

Profit & Loss

Time Frame Toggle:

You can use the toggle to define if you want your P&L to be summarized in total for the selected time period or instead be broken up per:

  • Week

  • Month

  • Quarter

Once that is decided, you can look through your P&L. Many of the displayed KPIs have a " as % of ..." below them which expresses them as a percentage of a previous total/subtotal. This allows you to analyze the various percentage improvements over time.

The following KPIs are shown in the P&L:

  1. Gross Merchandise Value - The original value (RRP) of all items sold before any discounts & deductions.

  2. Price Reductions Value - The total value of price reductions (not discounts or vouchers) of all product sold.

  3. Discount Code Value - The total price reduction through discount/voucher codes and cart rules.

  4. Shipping Revenue - The revenue made from shipping charges excl. discount.

  5. Gross Revenue - Revenue after discounts but before taxes and refunds

  6. Gross Orders - The number of all successful orders placed.

  7. Gross AOV - Gross AOV = Gross Revenue / Gross Orders

  8. Taxes - The VAT you need to pay.

  9. Return Value - The Net Revenue of all items that were refunded.

  10. Net Revenue - Revenue excluding discounts, returns and taxes

  11. Net Orders - Number of not-returned orders

  12. Net AOV - Net AOV = Net Revenue / Net Orders

  13. Cost of Goods Sold - The landed product costs of all items sold.

  14. Contribution Margin 1 - Net Revenue - COGS

  15. Logistics Costs - Costs for Shipping, Picking, Returns etc. of sold items.

  16. Transaction Costs - Costs incurred from Payment Providers

  17. Contribution Margin 2 - Net Revenue - COGS - Logistic Costs - Transaction Costs

  18. Marketing Costs - Marketing Costs from all connected datasources

  19. Contribution Margin 3 - CM3 is your profit after deducting all variable costs

  20. Overhead Costs - all other costs like salaries, rent, agency costs, software etc. entered in the custom costs sheet

  21. EBITDA - Earnings before interest, taxes, depreciation & amortization

What can I use this for:

Like mentioned before, this report is create in order to understand how your margin structure as well as overall profitability is developing over time.

You can also use these details to derive your targets for your MER (see Klarcademy article on setting targets for your marketing team).

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