How to analyze gross margin in NetSuite

How to analyze gross margin in NetSuite

1. Short introduction

Gross margin is one of the most frequently reviewed finance KPIs. Yet in many companies, it’s also one of the least understood beyond the headline percentage.

2. The problem finance teams face

Most finance teams can report gross margin quickly. What’s harder is explaining why it moved, what actually drove the change, and whether it’s something the business should worry about.

When gross margin shifts, leadership expects answers: Is pricing deteriorating? Are costs creeping up? Is the product mix changing? Too often, finance can only point to the final number without a clear narrative behind it. That limits the quality of decisions and turns margin discussions into opinion-based debates instead of fact-based conversations.

3. Why this is hard today (systems, NetSuite, processes)

In theory, NetSuite contains everything needed to analyze gross margin properly: revenue, COGS, inventory, vendors, items, entities, and currencies. In practice, pulling these pieces together is slow and fragmented.

Gross margin analysis usually requires combining data across modules, aligning revenue and cost at the same level of detail, and adjusting for timing issues like accruals or inventory movements. NetSuite is a powerful database, but answering analytical questions often means custom reports, saved searches, or exporting data into spreadsheets.

The result is that margin analysis becomes a month-end exercise rather than an ongoing process. By the time finance has reconciled the numbers and produced a view they trust, the opportunity to act has often passed.

4. How teams usually try to solve it (and why it fails)

Most teams fall into familiar patterns:

• High-level reporting: Tracking gross margin at company or entity level. This is fast but hides what’s happening underneath.
• Excel-based deep dives: Exporting data from NetSuite to analyze margin by product, customer, or channel. This offers flexibility but is manual, hard to repeat, and difficult to audit.
• Reactive investigations: Only analyzing margin when it drops significantly. These one-off analyses rarely turn into a repeatable process.

All of these approaches focus on producing a number, not on building a reliable way to understand margin drivers. Over time, the same questions resurface because the underlying process never improves.

5. What a better approach looks like (conceptual, practical)

A better way to analyze gross margin starts by shifting the question. Instead of asking “What is our gross margin?”, finance teams should ask:

• What changed versus last period?
• Which dimension explains most of the change (product, customer, geography)?
• Is the movement driven by price, volume, or cost?
• Is this change temporary or structural?

This is where variance analysis becomes essential. Rather than treating margin as a static KPI, teams should consistently break down movements into explainable components. If variance analysis is unclear or inconsistently applied, it’s worth revisiting the fundamentals of how margin changes are explained and communicated.

Importantly, this analysis should not live only in spreadsheets or one-off reports. It needs to be repeatable, traceable, and easy to revisit when leadership asks follow-up questions.

6. How modern finance teams handle this today

Modern finance teams aim to make gross margin analysis part of their regular operating rhythm, not just a month-end deliverable. Instead of manually stitching data together, they rely on tools that can surface drivers quickly and explain changes in plain language.

This is also why traditional dashboards often fall short. Dashboards can show that margin moved, but they rarely explain why. Understanding the limits of dashboards helps finance teams choose the right tools for analysis instead of adding more charts that don’t answer real questions.

Teams that operate this way tend to review margin more frequently, often weekly, alongside other core KPIs. Aligning margin analysis with a weekly review cadence helps catch issues earlier and keeps discussions grounded in data rather than assumptions.

Tools like Simon support this shift by sitting on top of NetSuite and reducing the friction between data and explanation. Instead of pulling reports and reconciling numbers manually, finance teams can focus on interpreting results and discussing implications with the business.

7. Final takeaway

Gross margin is not just a number to report; it’s a signal that needs interpretation. Analyzing it properly means moving beyond the headline percentage and building a clear understanding of the drivers behind it.

For finance leaders, the real improvement is not better-looking reports, but faster, more reliable explanations. When gross margin analysis becomes repeatable and accessible, finance can spend less time assembling data and more time guiding decisions.