Record every expense under a category
An expense in Wave POS is money the business spends on anything other than stock to sell. You record it in the back office with the date, the amount, the category, who it was paid to and how it was paid.
New shops start with the usual categories, such as rent, salaries and wages, electricity and water, transport and fuel, airtime and internet, and bank and M-Pesa charges. You can add your own.
Stock you buy to sell is not an expense. It comes in as a purchase and becomes cost of goods sold when it sells. That keeps a month with a big restock from looking like a loss.
Petty cash from the till drawer
Petty cash is cash taken out of the till drawer to pay for something small, and Wave POS records it as an expense at the same moment. When the cashier takes out KSh 500 for KPLC tokens, or KSh 200 for a boda boda to fetch change from the bank, they record a cash out at the till, mark it as an expense and choose the category.
That one step does two jobs:
- The cash out is part of the shift, so the drawer count at close expects KSh 500 less and still balances.
- The expense shows in the expenses report and the profit and loss, marked as petty cash from the till.
Unrecorded petty cash is one of the commonest reasons a drawer comes up short with nobody able to say why. Our guide to cash drawer reconciliation covers the rest of the count.
The profit and loss report
The profit and loss report shows what the business made over any period, for one branch or all of them: sales, cost of goods sold, gross profit, expenses by category and net profit. Sales are net of returns.
Here is a month for a minimart in Thika:
| Line | KSh |
|---|---|
| Sales | 1,240,000 |
| Cost of goods sold | 967,200 |
| Gross profit | 272,800 |
| Rent | 45,000 |
| Salaries and wages | 96,000 |
| Electricity and water | 14,500 |
| Transport and fuel | 9,800 |
| Repairs and maintenance | 6,500 |
| Bank and M-Pesa charges | 4,200 |
| Airtime and internet | 3,000 |
| Total expenses | 179,000 |
| Net profit | 93,800 |
Read it from the top. The shop sold KSh 1.24 million of goods that cost it KSh 967,200, leaving a gross profit of KSh 272,800, a gross margin of 22%. Running the shop cost KSh 179,000, so the owner made KSh 93,800, about 7.6% of sales.
The useful questions come from comparing months. If sales went up but net profit did not, look at the gross margin first (are you selling more of the low-margin lines?) and then at the expense lines that grew. The guide to calculating shop profit walks through it.
Profit measured at the cost of sale
Wave POS measures profit with each item’s cost at the time it was sold. Every purchase updates the item’s average cost, and each sale keeps the cost it had on that day.
Say the average cost of a 2 kg packet of sugar was KSh 250 in August and rose to KSh 265 in September after a new delivery. Sales made in August keep the KSh 250 cost, so August’s profit does not change when you look at it again in October.
The expenses report
The expenses report lists what you spent by category, by day, by payee or by how it was paid, with petty cash from the tills shown apart. It answers questions like “how much did transport cost us this quarter?” in a few seconds.
Like every report in Wave POS, it exports to Excel, CSV or PDF, which is handy when your accountant asks for the year’s figures. The other reports are described under sales reports.
Who can record expenses
Recording and editing expenses is a permission of its own. Give it to the owner and the managers who pay the bills, and keep it away from roles that do not need it. Petty cash is different: anyone allowed to take cash out of the drawer at the till can mark it as an expense, as part of their shift.