NetSuite Gross Profit

NetSuite for Administrators

The NetSuite Gross Profit feature allows you to estimate gross profit both for your transactions and for the individual line items on your transactions. Let’s take a look at this feature and how it works in NetSuite.

NetSuite Gross Profit Overview

Gross profit is calculated as sales minus costs. When you enable the NetSuite Gross Profit feature, NetSuite adds some key fields, such as Cost Estimate Type and Estimated Gross Profit, to your standard transaction forms. These fields track and calculate gross profit. Gross profit can be calculated both at the line level and at the transaction level. It’s important to remember that gross profit calculations in NetSuite are based on estimated costs, and so the gross profit amount you see on transactions is an estimated gross profit and not the actual gross profit.

Setting Up NetSuite Gross Profit

To set up Gross Profit, you will need to enable the feature and set a couple preferences and permissions.

Enable Features

First, enable the Gross Profit feature. You can find this feature on the Sales section of the Transactions tab in Enable Features. No other features are technically required in order for you to use the Gross Profit feature, but there are some features that Gross Profit interacts with. If these features have also been enabled in your NetSuite account, the Gross Profit feature will have greater functionality. These features include the following:
  • Inventory
  • Sales Orders
  • Opportunities
  • Estimates
  • Project Management
  • Drop Shipments & Special Orders
  • Purchase Orders

Set Preferences and Permissions

Let’s take a look at a key preference and permission you will want to set up before using the Gross Profit feature.

Recalculating Estimated Cost

First, you will want to set your preference for the Recalculate Estimated Cost on Creation of Linked Transactions. This preference is located on the Other Transaction Preferences section of the Items/Transactions tab in Accounting Preferences.
Recalculate Estimated Costs on Linked Transactions
The three options for this preference are Always, Through Sales Order, and Never. Because gross profit is based on estimated costs, and because the estimated costs are subject to change throughout a transaction’s lifecycle, this preference allows you to determine when NetSuite will recalculate the estimated cost. If you choose Always for this preference, then at each next stage of the transaction (for example, Estimate to Sales Order to Invoice), the estimated cost will be recalculated. This ensures that your estimated gross profit is as accurate as it can be.

Overriding Estimated Cost

When you enable Gross Profit, two roles automatically have the ability to manually edit the estimated cost and gross profit fields on transaction lines: the Sales Administrator and the Sales Manager. You can provide this ability to other standard roles or custom roles by giving those roles the permission Override Estimated Cost on Transactions. Note, however, that this is a powerful permission, and you may not want to give it out too liberally.

Using NetSuite Gross Profit

After the initial setup for the Gross Profit feature, what does using it look like?

Calculating Cost Estimates

Let’s look at calculating cost estimates. NetSuite can use a variety of different methods to calculate the cost estimate. These include the following:
  • Average Cost
  • Custom
  • Derived from Member Items
  • Last Purchase Price
  • Preferred Vendor Rate
  • Purchase Order Rate
  • Purchase Price
You can learn more about each of these cost estimates and how they work in the Cost Estimate Type Descriptions help article.

How do you know which method of estimating cost you should use? Each item type has a default cost estimate calculation. Some item types will allow you to manually change the cost estimate type away from the default, but some item types only allow the one default type. You can learn more about which cost estimate types are available for which item types in the Available Cost Estimate Types NetSuite help article.

When you add a line item to transactions, the Cost Estimate Type field will auto-populate from what you have selected on the item record. If you have the appropriate permissions, however, you can use the dropdown to change the cost estimate type.

Cost Estimate Type Dropdown on Transaction Record

Viewing Gross Profit Fields

There are five key gross profit fields that are added to standard transaction forms when you enable the Gross Profit feature: Cost Estimate Type, Estimated Extended Cost; Estimated Gross Profit; Estimated Gross Profit Percent; and Estimated Unit Cost. You’ll be able to view these fields on the standard transaction forms for Cash Refunds, Cash Sales, Credit Memos, Estimates, Invoices, Opportunities, Return Authorizations, and Sales Orders. If you use custom transaction forms, you will need to add these fields to your forms in order to view them.

Reporting on Gross Profit

After you enable the Gross Profit feature, you can add gross profit fields to any of your standard sales reports if you want to see reporting on them. There are no dedicated standard gross profit reports, though you can build your own custom reports that are unique to your needs.

Conclusion

The NetSuite Gross Profit feature automates the process of estimating costs and gross profit for your items and transactions. If you enjoyed this blog, be sure to subscribe to our mailing list below to receive each week’s latest NetSuite blog post directly in your inbox.