In today’s business environment, it is vital to know how profitable each of your sales transactions is. While revenues indicate the earnings of the business from sales, the profit margin gives a clear view of how profitable the company is. Margin analysis plays a crucial role in making informed business decisions and supporting effective restructuring. Odoo simplifies this task by offering built-in margin analysis capabilities in a comprehensive ERP system. Irrespective of whether your business is product sales, service delivery, or sales through multiple sales channels, Odoo 19 allows you to calculate profits and get meaningful business performance insights. This blog post will take a look at margin analysis using Odoo 19 and will explain how to evaluate sales profit margins.
Margins on Sale Orders
Profit margin analysis helps businesses understand the difference between the selling price of a product and its cost, providing a clear view of profitability.
To enable margin calculations for sales orders, go to Configuration > Settings in the Sales and Accounting modules and activate the Margins feature. Once feature is activated, Odoo can calculate and display the margin for each sales order, helping you monitor the profitability of your sales.
When the Margin feature is activated on the sales order, Odoo provides the total margin of the order as demonstrated in the picture below. This helps the user get an idea of how profitable the order is and how much profit will be generated from it.
Margin for each of the product lines is also visible directly in the order line. This is calculated based on the difference between the product’s selling price and its cost price. Odoo also provides the margin in percentage, which makes it easier to analyze the profit of the product.
The sales margin is determined by calculating the difference between the product’s selling price and its cost price.
Sales Margin = Sales Price - Cost Price
For example, if the cost of “Corner Desk Left Sit” is $78 and its sales price is $85, the sales margin would be:
$85 - $78 = $7
Therefore, the sales margin for this product is $7.
Odoo 19 also provides useful tools to analyze sales orders and gaining insights into business performance. To view the sales analysis, go to Orders and select the Graph view to visualize the data. You can also switch to the Pivot view using the corresponding icon for a more detailed analysis. When you click Measures, you will find the Margin option, which allows you to include margin data in the report and evaluate sales profitability more effectively.
In the graph view, the Y-axis represents the total margin generated by each customer, while the X-axis displays the corresponding customer information. This feature makes it easier to compare margins across customers and calculate the margin rate for each one, providing valuable insights into overall business profitability and financial performance.
Product Margins
Product margin is the profit made when selling the product which can be produced by the company or bought from suppliers. The calculation of product margin assists companies in knowing how much profit they make from the sale of their products to determine whether they should continue selling them.
The product margin in Odoo can be determined through the formula:
Product Margin = Selling Price - Cost Price
Positive margin means that the product is being sold above its cost, making a profit. However, when the cost price is greater than the selling price, there is a negative margin, which means that there is a loss.
To help businesses monitor product profitability, Odoo provides a dedicated Product Margin reporting feature within the Accounting module. This report offers valuable insights into product-level profitability and supports better sales and business decisions.
The Product Margins option is available under Reporting > Management, as shown in the image below. When you select this option, Odoo opens a new pop-up window where you can view and analyze product margin details.
Users can specify the required details in the Product Margin window by selecting the From date, To date, and Invoice State. The Invoice State field provides different options, such as Draft, Open, and Paid. After entering the required criteria, click Open Margins to generate a product margin report for the selected period.
The generated report provides a detailed overview of product profitability through several key metrics, including Product Name, Internal Reference, Average Sales Unit Price, Sales Invoice Quantity, Turnover, Sales Margin, Total Cost, Purchased Quantity, Total Margin, Expected Margin, Total Margin Rate, and Expected Margin Rate. These metrics provide valuable insights into individual product sales, associated costs, and overall profitability.
Odoo also provides Filter and Group By options to make the analysis more focused. Users can apply existing filters, create custom ones, and group the data based on their specific reporting requirements, making it easier to extract the insights they need.
Users can select one or more products from the list using the checkboxes next to each product. After making the selection, the Action option becomes available, as shown in the following figure.
In addition to the list view, Odoo provides a Graph view for analyzing product margins visually. The data can be presented using different chart types, including line, pie, and bar charts, making it easier to identify profitability trends and compare products. By applying suitable Filters and Group By options, users can customize the analysis and generate product margin reports based on their specific requirements.
Product margin analysis offers useful information regarding the performance of your products and the profits generated from them. Such information can be useful to businesses in identifying profitable products, setting proper prices and sales plans, and launching profitable sales campaigns.
Margin analysis is an integral part of assessing business performance since it helps to understand the profitability of products, customers, and sales orders. While sales give information regarding income, margin analysis gives additional information about how profitable sales are. The use of the Margin analysis tool that is present in Odoo 19 helps to take better pricing decisions and choose products, customers and sales orders.
Tracking margins on sales orders, customer profitability based on sales reports, and product margins using the accounting module helps to analyze financial information and identify trends with the help of filters, group by, Graph view, and Pivot view in Odoo 19.
Regardless of whether you have a small or big business, you will be able to optimize prices, reduce costs, make decisions based on the data, and increase your profitability thanks to margin analysis in Odoo 19.
To read more about Overview of Margin Analysis In Odoo 18, refer to our blog Overview of Margin Analysis In Odoo 18.