One Blog Post at a Time
As Thanksgiving quickly approaches, I’m already thinking about the menu, the guests & the decor. It’s a beautiful time of year. Nothing makes me happier than to have the people I love all together. All the food is placed on the island, the heart of the kitchen, and everyone digs in. In my family, it’s usually a free-for-all after grace. As a host, I make sure that the path of plenty makes sense. What’s does that mean? Well… I want the turkey to be before the stuffing and the mashed potatoes to be before the gravy. See where I’m going with this? I want flow...ease…delight!
The Profit & Loss statement reflects this need for flow. The P&L is the go-to for most business owners. Ultimately, it works everyday to show us exactly where our business is making money or losing it. In order for the statement to work correctly we have to place items appropriately.
Today we are talking about the first item of the proper flow:
Sales & Income
Still confused about the tofurkey? Let me explain...
Sales is the amount generated from selling your product or service. Pretty simple stuff. Yet, let’s elaborate. From a strictly accounting perspective - one account titled “Sales” where everything gets dumped is fine. But from a managerial perspective, it leaves a bit to be desired. Imagine you have a roast, a turkey and a tofurkey at Thanksgiving. If after the meal, you take an overall account of how much was eaten, you wouldn’t have the necessary tools to make good decisions for NEXT Thanksgiving.
Therefore, it’s imperative to further detail your sales. If you sell multiple items break those babies down. I mean don’t go crazy and have a hundred items listed, class them if necessary - but have the categories detailed enough to truly tell your financial story.
To further assist in decision making, I recommend creating a P&L that has percentage of sales beside the account totals. This simple technique will show you exactly where your marketing and sales efforts are paying off.
Take a look. Which gives you more information in my silly example? It turns out, there’s no need for that tofurkey next year! :)
Many software systems such as Quickbooks® allow you to “map” your items to specific sales accounts. If you need expert advice and facilitation to get the most out of your reports, simply contact me at 336.262.5464 for an initial consult.
Happy Fall y’all!
Hi! It's Bridgett here! Are you ready to take your business to a new level? Let's do it!
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