Monthly P&L for a D2C Brand: A Simple Layout That Includes Returns
A monthly profit and loss statement for a Shopify brand: gross sales to operating profit, with returns, refunds, shipping and ad spend in the right places.
On this page
A monthly P&L for a D2C brand starts with gross sales, removes discounts, returns and refunds to reach net revenue, subtracts product, shipping and payment costs to reach contribution, then subtracts ad spend and fixed costs to reach operating profit. The two lines most brands get wrong are returns and timing: returns should come off the month the order was placed, and the month isn't final until they've settled. Build it from Shopify, your ad platforms, your payment provider and your bank, in the same layout every month.
Key takeaways
- Use the same layout every month so lines compare: net revenue, contribution, contribution after marketing, operating profit.
- Returns and refunds reduce revenue in the month the order was placed, not the month the parcel came back.
- A month's P&L is provisional until returns settle, once the return window on its orders has closed.
- Contribution after marketing is the number that tells you whether ads are paying.
- Keep revenue excluding sales tax and VAT, and all amounts in one currency.
The layout
| Line | What goes in it | Example month |
|---|---|---|
| Gross sales | Orders placed, excluding sales tax and VAT, before discounts | $60,000 |
| − Discounts | Codes, automatic discounts, bundles | $3,000 |
| − Returns | Orders placed this month that were sent back and refunded | $9,000 |
| − Other refunds and chargebacks | Partial refunds, goodwill credits and lost disputes on this month's orders | $2,000 |
| Net revenue | $46,000 | |
| − Product cost | Cost of goods for kept orders | $16,000 |
| − Shipping, fees, packaging | Forward and return shipping, payment fees, packaging | $8,000 |
| Contribution before marketing | $22,000 | |
| − Ad spend | Meta Ads, Google Ads and other paid media | $14,000 |
| Contribution after marketing | $8,000 | |
| − Fixed costs | Salaries, rent, software, agency retainers | $6,000 |
| Operating profit | $2,000 |
On $60,000 of gross sales, this brand kept $2,000. Returns were the largest deduction after product cost and ad spend, which is common for brands in categories like apparel and footwear, and easy to put in the wrong month if you book refunds on the day they were issued rather than by order date.
Where each line comes from
- Gross sales, discounts and refunds: Shopify's sales reports or order export, for orders placed in the month.
- Returns: Shopify refunds, or your returns app, matched to the month each order was placed. In cash-on-delivery markets such as India, add parcels returned to origin (RTO) from your shipping platform, such as Shiprocket.
- Product cost: cost per item in Shopify, or your purchase records, for kept orders only; returned stock that can be resold comes back.
- Shipping and fees: carrier and payment provider invoices or statements; include return shipping.
- Ad spend: Meta Ads and Google Ads invoices or billing summaries for the month.
- Fixed costs: your bank statement and accounting records.
Closing the month, step by step
- Wait for returns to settle. Draft the P&L in the first week, and finalize it once the return window on the month's orders has closed.
- Pull sales from Shopify for orders placed in the month, excluding sales tax and VAT.
- Subtract returns by order month. Match each refund to its order date, so September's returns reduce September's revenue even if they came back in October.
- Add variable costs for kept orders, plus shipping both ways on returns.
- Add ad spend from the platforms' billing, not from estimates.
- Add fixed costs from the bank and accounts.
- Compare with last month and with plan, line by line, and write two sentences on what changed.
Why returns belong in the order month
If you subtract returns in the month parcels come back, a strong month followed by a weak one looks better than it was, and the next month carries the previous month's returns. Counting returns in the order month keeps each month's profit tied to the orders and the ad spend that produced them. That's also how you see which months really made money; true ROAS after returns explains the same principle for campaigns.
Reading the P&L
- Net revenue as a share of gross sales shows how much leaks through discounts, returns and refunds. If it falls, find which line grew.
- Contribution before marketing shows whether the product and fulfillment economics work at all. Contribution margin covers the target range.
- Contribution after marketing shows whether ads are paying. If it's negative, growth costs money every month.
- Operating profit shows whether the business covers its fixed costs.
From monthly to per order
Divide each line by kept orders to see unit economics: revenue, product cost, shipping, ad cost and profit per order. That tells you what a change in price, shipping cost or cost per order does to the whole month. The unit economics template builds this view.
A worked comparison of two months
Suppose September had the same $60,000 of gross sales as August, but operating profit fell from $4,500 to $2,000. Line by line, the story becomes clear:
- Returns rose from $6,500 to $9,000, after a new campaign brought in more bargain hunters who sent orders back.
- Ad spend rose from $13,000 to $14,000 while net revenue fell, so contribution after marketing dropped.
- Shipping rose slightly, because return shipping on the extra returns is part of it.
With returns booked by order month, September's problem shows up in September. Booked on the day refunds were issued, much of it would have landed in October, September would have looked almost identical to August, and the new campaign would have been scaled. With the line in the right month, the fix is clear: tighten that campaign's audience and offer, improve sizing and product details on what it sells, or move budget elsewhere. The guide to tracing returned orders by campaign shows how to find which campaign is responsible.
This is the main value of a consistent monthly layout: changes stand out because every line is defined the same way each month.
Common mistakes
Leaving returns out of revenue. For brands with high return rates they can be one of the biggest deductions.
Booking returns when refunds are issued. It moves losses into the wrong month.
Product cost on all orders. Returned stock comes back; count cost on kept orders, and write off only what can't be resold.
Platform-reported revenue. Meta and Google overstate sales; use Shopify.
Closing too early. Wait for returns to settle before calling a month final.
Tera Ads works out the whole store's profit after returns from your Shopify orders and your Meta Ads and Google Ads spend, with returns counted in the month each order was placed and settling after about 45 days. Every campaign sits in one table with the money-wasters marked. It is free for one business.
Frequently asked questions
What should a D2C monthly P&L include?
Gross sales, discounts, returns, other refunds, net revenue, product cost, shipping and fees, contribution, ad spend, fixed costs and operating profit.
When should returns be counted in the P&L?
In the month the order was placed, so each month's profit reflects its own orders and ad spend.
When is a month's P&L final?
Once the return window on the month's orders has closed, usually a month or more after month end. Draft earlier, finalize then.
Should revenue include sales tax or VAT?
No. Use revenue excluding sales tax and VAT, because tax collected isn't your income.
Which number shows whether ads are profitable?
Contribution after marketing: net revenue minus variable costs and ad spend.