Money in your account is not profit. Here is the difference, and why the distinction saves people from pricing themselves out of business.
You sell R900 at a market. You feel good. You spent R400 on materials that week and R80 on the stall, so it feels like about R420 in your pocket.
But you did not sell everything you made. Some of that R400 of materials is sitting at home as unsold stock. And some of what you sold came out of a batch you paid for a fortnight ago. The R420 is a mix of two different things, and it is not your profit.
Profit = what you sold − what those particular items cost you to make − your other running costs.
The important word is those. You subtract the cost of the items you actually sold — not everything you spent.
A batch you made but have not sold yet is not a loss. It is stock. You have swapped cash for something you own and can still sell. Treating it as a loss makes a good week look like a disaster every time you bake ahead, and it pushes people into raising prices they did not need to raise.
Carrying on from a batch that cost R60 and made 5 loaves, so R12 a loaf, selling at R25.
This week you sold 3 loaves and also paid R20 for petrol to the market.
| Amount | |
|---|---|
| Sales (3 × R25) | R75 |
| Cost of the items you sold (3 × R12) | −R36 |
| Other running costs (petrol) | −R20 |
| Profit | R19 |
Notice what did not appear: the other R24 of that batch. Two loaves are still on the shelf. That R24 is stock, and it becomes a cost on the day you sell them — not before.
Cash you spent this week: R60 on the batch plus R20 petrol = R80. Profit: R19. Both numbers are true, and they answer different questions.
Tells you whether the business works. If profit is thin after a busy month, your prices or your costs need attention, and no amount of selling harder will fix it.
Tells you whether you can pay for next week. You can be profitable and still short of cash, because you put money into stock that has not sold yet. This is the most common squeeze small makers hit, and it is not a sign you are doing badly.
Keep them separate and each one stays honest. Mash them together and you get a number that is neither.
Because a batch you have not sold yet is not a loss, it is stock you own. Subtracting all of it would make every week you produce ahead look like a bad week, and every week you run down stock look better than it was.
Not necessarily. Cash in the bank can be money you have not yet spent on replacing stock. Profit and cash answer different questions: whether the business works, and whether you can pay for next week.
Anything you would still pay if you made nothing this week: stall fees, petrol, airtime, bank charges. Product costs are the materials and packaging consumed by a specific batch.
Once a week is plenty for most home businesses, plus a longer look each month. Checking daily makes normal ups and downs feel like problems.
Little-Till is a small web app for people who sell what they make. You record a batch and what it cost, record your sales, and it keeps the cost per item, what is left in stock and your real profit up to date. It is built for a phone, works when the signal drops, and shows amounts in Rand.
R49 a month or R495 a year, with 14 days free and no card needed to start.
Try Little-Till free