How to calculate lost profits

The loss of profit today is considered to be the income that a private person would receive under ordinary circumstances, but would not receive it if a situation arises that is not directly dependent on him. In order to make a calculation of the amount of lost profit, you must first determine the type of estimated profit.

You will need

• contracts with contractors and customers

• enterprise financial plan for the year

• calculator

Instruction manual

1

Determine the amount of lost profit under the contract not properly executed. In the general concept, the amount of lost profit is equal to the amount of money that a private person would receive if he or his counterparty properly performed their obligations under the contract. For example, a car rental agreement assumed that the cost of this service is 30 thousand rubles per month. Suppose a car was damaged by the tenant during the lease period. Lost profit then will be equal to 30 thousand rubles, multiplied by the number of months during which the car is not functioning.

2

Calculate lost profits due to late delivery. The amount of lost profits can be equated to the volumes of sales for the past period minus short-delivered products. For example, an enterprise sells furniture. Buyers made an order for him for 150 thousand rubles. The customer’s order and other furniture were not delivered on time. In this situation, lost profits can be equated only to 150 thousand rubles, as there is insufficient evidence that the rest of the furniture in the supply would be sold out on time.

3

Evaluate the planned sales volume of your company and on the basis of this calculate the lost profit. Some methods advise to take into account when calculating the amount of lost profit, such circumstances as the planned sales, change in the assortment due to undelivered products, lower quality, seasonal sales conditions. Thus, the amount of lost profit involves taking into account all the circumstances that ultimately affected the size of the estimated profit. All minor and extraordinary conditions that have caused a breach of contract should be considered. These changes in estimated earnings may be recoverable.

note

The official confirmation also confirms the non-fulfillment of obligations under the contract of one of the parties, which entailed the loss of profit.

Useful advice

In order to compensate for lost profits, each planned profit indicator must be supported by appropriate documentation.

• Legal Information Portal
• loss of profit calculation