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BGG_Shark
05-09-2017, 07:16 PM
Hi,

I am trying to understand the difference between “profits” and “proceeds”. For some reason it’s been difficult to find this on the web. The reason I want to know the difference is we would like to donate a certain percentage of the business to a charitable organization. We want to make sure we are advertising the type of percentage accurately.

I would like to use an example to help me to understand the difference, with jewelry as the example. Say in one month these were the numbers:

Sales: $1000.

Lets say 50 necklaces were sold at $20 each. 25 were sold at a retail store that takes a 20% commission and 25 were sold at a vendor event.
Assume each necklace costs $5 each to make (cost of beads, chains, charms)
Expenses: $500 (beads, chains, website fees, advertising, equipment, $100 retail store 20% commission, $100 vendor event fee, etc.)
Taxes: $150 (sales tax, business tax, income tax), assume 30% of (sales – expenses)

My understanding is the profit would be $350. What however would be the “proceeds” in this example be? And maybe it's different for both the vendor event and retail store?

I’m not sure if I’m even on the right track with my question here and how I’ve set things up, thanks though for helping me out.

Fulcrum
05-09-2017, 09:25 PM
Your gross profit would be $500. Assuming a 30% tax rate (sales, business, income are 3 different taxes) on the $500 gross profit you would have $350 as a net profit. Of course I'm leaving out labor and other indirect overhead costs in this simplification

As for the difference between profit and proceeds, they are often interchanged. I've always used the term proceeds as the full sale amount and not deducting COGS and other expenses.

tallen
05-10-2017, 05:58 AM
Unfortunately, the dictionary on my computer isn't very helpful:


proceeds -- money obtained from an event or activity: proceeds will help purchase new equipment.

Leaving it unclear as to whether they are referring to gross revenue, as opposed to net revenue, gross profits, or net profits.....

I think pretty much everyone understands profit (net profit) to be the amount that is left over after covering all of your other expenses (except income taxes on that profit).

Since proceeds is ambiguous, don't use it. If your intention is to donate a percentage of your profit, say that. If your intention is to donate a percentage of all sales (gross revenue), say that...

turboguy
05-10-2017, 05:01 PM
I have always understood proceeds to be the same as revenue or sales. It is the gross amount received.

BizAdvisor
05-10-2017, 10:01 PM
In all honesty, I have never actually heard the term "proceeds" used in a professional business setting. In fact, I'm pretty sure if I threw out the term "proceeds", in replace of "profits", my colleagues would look at me like I just sprouted antlers. Now, as for the term "proceeds" being used at fundraisers and charitable events... Absolutely.

WarrenD
05-11-2017, 02:08 AM
Proceeds can mean either profit or revenue, but I've usually seen it to mean revenue. See definition of proceeds at merriam webster's. It gives both meanings - revenue and profit. https://www.merriam-webster.com/dictionary/proceeds