Trade price, cost price and selling price are not interchangeable

Selling price is what the customer pays. Cost price is what the business actually pays for the product. Trade price is often a supplier's list price before any negotiated terms. They are easy to mix up in a spreadsheet, and the difference changes every margin calculation built on top.

• A product feed carries a trade price that is treated as the real cost.
• Selling prices include tax in one source and exclude it in another.
• Discounts are applied to revenue but not reflected in the margin.
• Costs are updated once a year while prices change every week.

An illustrative example

Imagine a product sold for a price that includes tax, with a trade price that is higher than the negotiated cost. Calculating margin from the tax-inclusive price and the trade price gives a figure that looks reasonable and is wrong in two directions at once. The error only shows when someone reconciles each number back to its source.

Before any profitability analysis, write down which price is used, whether tax is included, and when costs were last updated. It is a short note, and it is what makes the later decisions trustworthy.