Should You Include Labour Costs in Your Gross Profit? #131

Should you be including your labour costs in your gross profit? Claire breaks down why this simple question trips up more business owners than almost any other line on the P&L, and why getting it wrong can make a good month look bad and a bad month look good. If your gross margin swings wildly for reasons you can't explain, this episode is for you.

Key Topics Covered:

Why seasonal businesses that load subcontractor costs into cost of sales end up thinking their gross profit is worse than it actually is

Why putting fixed salaries into gross margin distorts the number every time sales move up or down

The three-step approach to working out which staff costs belong in cost of sales

How to get 75 to 80 percent of the way there without tracking every minute of every day

What utilisation and capacity data reveals once you separate client-facing time from everything else

Why this sits closer to management accounting than traditional compliance-focused accounting

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