| BookSmart Financial PaperWork Management Some Key Questions About Your Business Were Sales Up or Down Last Month? When sales increase, cash needs increase for replacement inventory. If sales decrease, you will want to review new inventory purchase commitments. What was my gross profit last month? Gross profit reflects the profit from sales when subtracting the cost of products or services sold. Changes in gross profit can indicate if pricing strategies are effective. Price reductions to increase sales can hurt if overall gross profit is reduced. What is my gross profit per item? Selling prices should reflect profit goals. Inventory mix in combination with known item gross profit allows optimized profitability. Sales incentives can be discriminated by product allowing for most profitable sales. What were my expenses last month? Categorized expense records allow you to assess whether expenses are too high. You can then make selective reductions. Expense records will also be organized for tax reporting. Who owes me money; how much? To be paid fully and promptly, you must tell your customers exactly and regularly what they owe. An itemized and up-to-date monthly statement tells your customers that expect prompt payment. Who’s behind in payments; how much? Customers who are behind in payments need immediate, and frequent, contact. Before approving new orders, you will want to know that these customers are current in their payments. How much inventory do I have? If you know your total inventory by item, you can reorder at appropriate times in advance so that you don’t run out and/or pay expediting charges. Comparing to sales records, you can determine if you hold too much inventory in a single item. A physical inventory count can be compared to the books to see if a shortage problem exists before it adversely affects the business. Who do I owe money to; how much? Paying your bills on time will improve your ability to get business credit. Many vendors offer discounts for prompt payment. Also, knowing this information allows you to plan your cash needs thereby reducing bank borrowing. What was my net profit last month? This is your monthly financial bottom line. It reflects where you have been and how close you are getting to where you want to go. |
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