What is the estimated profit

In the practice of any enterprise, whether it is a newspaper concern or a private construction company, there is such a thing as the estimated profit. It is extremely important in calculating the income and expenses of a legal entity.

Estimated profit is the estimated income of an enterprise, minus the cost of work, designed to cover the costs of the development of the organization, the payment of its employees and the improvement of its social sphere. Its size is either calculated at the conclusion of each new contract, or agreed between the customer and the enterprise in advance. The second case, as a rule, is used when the normative industry-wide estimated profit can not cover all the expenses for the development of the company described above and the material stimulation of employees described above.

The estimated profit is not calculated to cover overhead (indirect or unforeseen) expenses of the enterprise. They are usually calculated separately. Then these expenses are included in the estimate and are paid on an equal basis with any other necessary costs.

The estimated profit is calculated as a percentage within the limits of the norm accepted by the legislation. The basis for the calculation is the wages of workers, which, according to the standards, should be at least 65% of the estimated profit. Also it is necessary to take into account the average cost of works and the rate of the enterprise itself.

At large enterprises (for example, in construction companies) a special set of documents is being prepared to settle business relations between the customer and the builder.

Estimated documentation is a complete set of necessary papers with data on the project, all its details, planned costs and expected profit. It indicates the prices for all types of work produced by the enterprise, as well as a detailed description of the conduct of these same works with graphical drawings and diagrams.

The normative estimated profit in many sectors has not been sufficiently developed by Russian legislation. Therefore, in all disputable cases, enterprises depart from accepted standards and designate the contractual value of their work. For example, at large construction sites, where many people work, wages per worker are below average, so the construction company has the right to increase the estimated profit to ensure its future activities.

So, the estimated profit, or, as it is sometimes called, "net profit", represents the income of an enterprise from a project, the means of which are sent to improve its further work. Its size is determined depending on state, regional and local standards (norms established within the firm, average wages, and so on). The value of the estimated profit does not need to be explained. If it were not for her, the enterprises would lose the opportunity to develop, the workers would lose their salaries, and the whole industry would fall into decay. Therefore, it is extremely important to correctly calculate the estimated profit to maintain the optimal balance in the company, its development, the relationship between it and the customer.