Traditional Profit and Loss statements you receive from your Accountant are generally prepared for taxation purposes. These statements contain critical information to help you manage your business, yet it is presented with expenses sorted alphabetically. (Unfortunately we don’t spend and earn income alphabetically!)
This provides no useful information about inefficiencies, about what parts of your business are doing well and what parts aren’t.
At Australian Business Breakthroughs one of the first things we will assist you in doing, is to set up your accounts so that they have meaning to you.
- GROSS PROFIT % AFTER PURCHASES – Problems in this area are to do with overall revenue, paying too much or not selling your product/service for enough. It can also be effected by things such as stock losses.
- REAL GROSS PROFIT BY PRODUCT/SERVICE % AFTER COGS – Problems in this area mean your efficiencies are off. ie. staff are taking too long to complete production work, machinery is not performing optimally etc. By separating your real Gross Profit according to different products or services your business offers, you gain key insights into what is boosting your profit and what is draining it.
- NET PROFIT % AFTER OVERHEADS – Problems in this area mean that your overheads are too high. You need to look at perhaps reducing rent, changing location, re-negotiating telephone, electricity etc.
- NET PROFIT AFTER DRAWINGS – You’re taking more money out of the business than the business can afford at this point in time. Go back to steps one and two to make the biggest impact down here!
By looking at percentage changes across regular intervals in your business, you will immediately come to realise where problems are arising, foresee impacts of slower sales months on cash flow shortages and make immediate corrections so that you stay on track to achieve your goals.
