Management reports can help business owners keep on top of the performance of their business throughout the course of the year. They provide a foundation on which discussions, insights and operational + strategic decisions can be made as you run your business.

To get the most from these reports it is important the presentation highlights and explains the key figures in your business. Notably;

  • Cost of goods sold [COGS],
  • Gross profit,
  • Other direct costs, and
  • Contribution margins.

presenting management reports

There are two main calculations that go into a management report for an ecommerce business; gross profit and contribution margins. 

gross profit = revenue – cost of goods sold

contribution margin = gross profit – other costs

To understand the information that can be derived from these numbers, let’s first look at the separation of costs.  

For cost of goods sold, limit this figure to the landed cost of inventory and the cost of getting goods to customers. The fully landed cost of inventory includes things such as the cost of products, packaging, any post-manufacturer quality control, shipping to your warehouse and any import and export duties paid in doing this.  

When measuring this, a per-unit average cost basis is used, and processed to COGS as products are sold.

COGS = units sold x (average cost per unit + outbound freight + associated costs)

The cost of goods sold is driven by the sales volume within the reported period.


other direct costs

For other direct costs, it’s important to look at costs that vary depending on revenue, but they can be both driven by revenue [such as merchant and platform fees] and be a driver of revenue [such as customer acquisition and direct advertising].

The burden of these costs in any given period does fluctuate with sales volume, but unlike the cost of the products, they can fluctuate significantly depending on,

  • the sales channels being used,
  • the countries being sold in and other foreign factors,
  • the advertising strategies for the given period.

These costs are still important in measuring at a gross level but are different enough in nature to warrant separating from the core gross profit.


why present these in separate margin lines?

Firstly, the two costs do behave slightly differently. Essentially, little fluctuation is seen in the cost of goods sold, relative to sales. Price fluctuation may appear over the course of the year, but any movement will be easily explainable and should follow a trend, we don’t expect to see the margin jumping around.

In most cases, in measuring costs of goods sold, a commitment or payment is recorded from a prior period and it is important to recognise the cost when selling products


gross profit

From a gross profit perspective, it is important that this recognition of cost is accurate, inconsistencies in the gross profit margin provide a red flag that there may be issues in the inventory valuation or carrying balances that require further investigation.

If the gross profit figure has also carried the other direct costs, which is expected to fluctuate, a variance caused by inaccurate inventory costing or valuation, can potentially be simply written off as a normal variance.

Seeing these separated from gross profit helps to provide more clarity on exactly how much these extra costs of sales are coming out of profit. Generally, the biggest other direct cost is customer acquisition; expenses like influencers, Facebook, Google, or TikTok advertising.


contribution margin

Direct costs have a direct relationship with sales volume. However, these fluctuate wildly depending on decisions made in a given period. As opposed to the COGS, in which the cost is driven by the sales volume, customer acquisition costs drive sales.

It’s also almost impossible to understand which period exactly the sales, which come as a result of this period’s advertising will fall into.

There is still value in representing these costs as direct costs and showing the profit before overheads. These are still the costs that a business has the greatest control over.

This is where the contribution margin is used.


we’re here to help!

When we present management reports, we see the value in the discussions and insights that can be held off the back of the reports. The above presentation method enables us to provide greater value in these areas, along with other crucial financial metrics.

The businessDEPOT Ecommerce + Digital teams work on these solutions and strategies daily and would love to help you with yours!

If you would like help improving the efficiency of your tech stack or determining which automation and integrations would work best for your business, get in touch with our team at or give us a buzz on 1300BDEPOT.



general advice disclaimer

The information provided on this website is a brief overview and does not constitute any type of advice. We endeavour to ensure that the information provided is accurate however information may become outdated as legislation, policies, regulations and other considerations constantly change. Individuals must not rely on this information to make a financial, investment or legal decision. Please consult with an appropriate professional before making any decision.