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Can You Answer These 10 Questions About
Your Business?
- Were my total sales up or
down last month? Were they designated by sales category?
- What was my total gross
profit last month? Was it designated by sales category?
- What is my gross profit
per item?
- What were my expenses by
category last month?
- Who owes me money, and
how much?
- Who's behind in paying me,
and by how much?
- How much inventory do
I have, in total and by item?
- Who do I owe money to,
and how much?
- What was my profit last
month?
- How much do I own, and how
much do I owe?
1. Were my total sales
up or down last month? Were they designated by sales category?
Here's why you need to know: If your sales are up, you'll
need extra cash to buy replacement inventory. If your sales
are down, you'll want to pull back on inventory purchases.
Sales increases in a category can mean a new growth opportunity.
Sales decreases need to be investigated to find out the reason.
Back to questions
2. What was my total
gross profit last month? Was it designated by sales category?
Here's why you need to know: Gross profit shows the profit
left from sales after subtracting the cost of the products
or services you sold. Changes in gross profit show whether
your pricing strategies are working. Cutting prices to increase
sales can hurt you if it reduces your gross profit.
Back to questions
3. What is my gross
profit per item?
Here's why you need to know: Selling prices should be based
on profit goals instead of estimates. By raising the prices
on some items and selling others near or below cost, you can
change your inventory mix and increase gross profits. An increase
of just 1% may add thousands of dollars to net profits. You
can give sales incentives that will cause employees to sell
the most profitable items instead of the easiest ones.
Back to questions
4. What were my expenses
by category last month?
Here's why you need to know: Are payroll costs too high? What
about insurance costs? The telephone? In order to cut back
on expenses, first know which ones are out of line. Recording
your expenses each month ensures that you get the maximum
tax deductions.
Back to questions
5. Who owes me money,
and how much?
Here's why you need to know: You can't expect to get paid
in full unless you tell customers exactly, and regularly,
what they owe. An itemized, neatly printed and up-to-date
monthly statement tells customers that you expect to be paid
on time according to your payment terms.
Back to questions
6. Who's behind in paying
me, and by how much?
Here's why you need to know: Customers who fall behind need
to be contacted immediately and often, so it doesn't become
a habit. Also, before you approve a new order from a customer,
you'll want to know if that customer paid you on time for
the last order.
Back to questions
7. How much inventory
do I have, in total and by item?
Here's why you need to know: If you're running low on an item,
you can reorder in advance and not be out of stock. Plus,
you can avoid rush delivery charges. If you have too much
of an item or of inventory in total, you can cut back on your
inventory investment. Also, you can compare a physical count
to the books and identify a shortage problem before it puts
you out of business.
Back to questions
8. Who do I owe money
to, and how much?
Here's why you need to know: Many vendors offer discounts
for paying bills in less than 30 days, which can add up to
big savings on an annual basis. Paying your bills on time
will increase your chances of getting business credit. Plus
you can plan for your cash requirements and reduce the need
to borrow from a bank or your own funds.
Back to questions
9. What was my profit
last month?
Here's why you need to know: A monthly profit figure gives
you the financial bottom line and lets you know where you've
been and where you're going. Plus, you can save hundreds to
thousands of dollars, on year-end tax return fees, and plan
for the tax bill months in advance.
Back to questions
10. How much do I own,
and how much do I owe?
Here's why you need to know: Keeping track of your current
assets and liabilities allows you to plan for your cash needs,
and helps you stay in compliance with loan agreements. Plus,
you'll be instantly ready to respond to questions from suppliers
or potential customers.
Back to questions
Leave the hassle to me. Call Ed at 801-205-2807 or email me today to discuss your accounting and tax needs.
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