You can find this section under Reporting > Monthly Statistics > in the IRP Shopper Admin left navigation menu.
Adding Overheads enables the IRP Trading Terminal to calculate and display Net Profit Per Unit.
Ecommerce profits are achieved by maintaining Product Margin, controlling Traffic Spend and managing Overheads.
Business overheads are the indirect, ongoing expenses in the Merchant to keep the business running. Overheads include packaging, shipping, rent, utilities, insurance, general staff and administrative salaries. Knowing these costs is crucial for understanding a business's financial health and overall Net Profitability.
IRP goes one step further with the calculation of Net Profit Per Unit (NPPU). IRP uses these 'Overhead' figures entered by the Merchant to apply an overhead cost to each unit in an order.
The following equations show the maths behind net profit:
- Traffic x Conversion Rate x Average Order Value = eCommerce Sales
- eCommerce Sales - Cost of Goods = Gross Profit
- Gross Profit - Traffic Spend = eCommerce Gross Profit
- eCommerce Gross Profit - Overheads = NET PROFIT
- Overheads% applied to Unit = NET PROFIT PER UNIT
Compiling accurate monthly overhead costs may require the support of finance teams and your IRP Agency. The explanation below explains the data to be entered.
Entering these values accurately gives Merchants Visibility of Net Profit Per Unit in the Trading Terminal. The Guide numbers below are purely to set context and vary for each Merchant.
| Setting |
Description |
Guide |
| Payment Processing Percentage |
The percentage of each order overall paid to payment providers such as Global Payments and PayPal. This is separate from other Per Order Variable costs such as platform transaction fees. For example, if Global Payment has 1% fee and PayPal a 2% fee then the percentage to attribute per order is 3%. |
1.4% |
| Per Order Variable Percentage |
The percentage of each order overall that you pay to providers, for example platform transaction fee%, any Agency Fee. |
3% |
| Per Order Fixed Cost |
The fixed cost of processing each order (irrespective of the number of unit items in the order), including but not limited to packaging and postage labels. |
50p |
| Shipping Charge |
The amount CHARGED to Customers to ship all the orders in the month. For example, if you charged your customers £5,000 in the month to your customers then enter this value. |
E.g. £5,000 |
| Shipping Costs |
The amount PAID to all carriers to ship your orders, For example, if you paid £4,000 in the month to carriers then enter this amount. |
E.g. £4,000 |
| Monthly Fixed Cost |
This is the large Overheads number. This is the fixed cost of running the business, excluding Order Fixed Cost and Shipping Charges. Including but not limited to WAGES, Rent, Rates, Energy and Administration costs. |
|
* It is important to note that TRAFFIC SPEND is entered separately on the Traffic Spend tab.
