Tip of the week: Know the difference between profit and cash in hand

Having money in the till does not mean you are making profit. Cash may come from customers who paid for last month's goods, from a loan or from your family. Profit is what remains after subtracting all your costs from your sales.

A simple formula: sales minus the cost of goods sold, minus expenses such as rent, transport, salaries and electricity, equals profit.

Example: a food vendor in Mwanza sells meals worth a total amount in a week. She subtracts what she spent on rice, oil and charcoal, and also her transport and gas. What remains is her profit. If she forgets the transport and gas, she believes she earns more than she does.

Work this out weekly. If the profit is small or negative, look at your prices and costs.

LiberLite Record Keeping shows profit and charts from the sales and expenses you enter, which saves doing the sums yourself.

This week: calculate last week's profit using the formula.