Collect comparable records first
Records and boundary checklist
- Choose the order, channel, currency, period and indirect-tax basis. (not complete)
- Reconcile recognised order revenue and any customer-funded shipping. (not complete)
- Gather product, packaging, outbound shipping and handling records. (not complete)
- Separate percentage, fixed, recurring and conditional fee components. (not complete)
- Define how returns and acquisition costs enter this order boundary. (not complete)
- Record whether fixed overhead is excluded or deliberately allocated. (not complete)
Build and reconcile the stack in order
- Record order revenue once on the selected basis.
- Subtract product cost for the units in that order.
- Subtract packaging, handling and outbound shipping without duplicating any component.
- Translate each applicable percentage, fixed and conditional fee into an order amount.
- Add expected return loss and acquisition cost only if the stated contribution boundary includes them.
- Reconcile the calculated net proceeds to the settlement and the cost stack to business records.
- Label the result contribution per order and preserve the list of included and excluded costs.
Contribution per order = order revenue - product cost - fulfilment cost - transaction fees - other included variable costs
- order revenue
- Recognised revenue for the order on the stated basis (currency units per order) — business record
- product cost
- Cost of goods in the order (currency units per order) — business record
- fulfilment cost
- Packaging, handling and outbound delivery inside the boundary (currency units per order) — business record
- transaction fees
- Applicable percentage, fixed and conditional order fees (currency units per order) — current contract and settlement record
- other included variable costs
- Explicitly named return, acquisition or other order-variable costs (currency units per order) — business record or user scenario
| Checkpoint | Test | Stop when |
|---|---|---|
| Revenue | Order revenue matches the selected order record | Refund, shipping or indirect-tax treatment is unclear |
| Settlement | Gross amount less fee components explains net settlement | An unexplained deduction or credit remains |
| Cost stack | Every cost has one owner and one unit | One cost appears in two categories |
Work a contribution example
A neutral one-order reconciliation
All values are user assumptions in currency units and illustrate the process rather than a typical order.
| Line | Calculation | Value |
|---|---|---|
| Order revenue | Recorded once | 120 |
| Product cost | Two units at 22 | (44) |
| Fulfilment | Packaging 3 + handling 5 + delivery 10 | (18) |
| Percentage fee | 3% of 120 | (3.60) |
| Fixed fee | Per transaction | (0.40) |
| Contribution | 120 - 44 - 18 - 3.60 - 0.40 | 54 |
Avoid mistakes that overstate contribution
- Using a headline fee percentage without the fixed or conditional components that apply.
- Subtracting customer-funded shipping from revenue and again as a cost without reconciling the order record.
- Counting packaging or delivery in two fulfilment categories.
- Allocating a recurring fee with an unstated or mismatched order-volume period.
- Calling contribution net profit without checking fixed overhead, financing and other excluded costs.
Methodology sources
- Ecommerce Order Profitability methodology — Margin101: Product-owned contribution boundary, formula and validation rules.