Income Statement 101

As an entrepreneur or small business owner, you have an incredible amount of domain knowledge and experience in the industry you serve.  You are a fabulous artist, the most sought after income statementgraphic designer, an incredible professional organizer, so on and so forth.  But, you may not have a lot of experience in managing the finances of your growing business.  You know how to send invoices, pay bills and review your bank account, but do you know how the business is actually performing?  Do you know how to int
erpret those fancy reports that your accounting software is producing for you?  Which ones should you even be looking at in the first place?

We are here to help!  In this post, we’ll briefly explain how to review the marquee of all financial reports, the income statement.  Also referred to as a profit and loss statement or the P&L, the income statement will provide you with a breakdown of how you made your money, how much money you spent and how much is left over.

The following advice is based on the P&L formatting that I recommend my clients use.  You can access a template version of that format here.  When reviewing an income statement, you want to review the following things:

  • Ensure that all expenses are categorized correctly. Pay close attention to miscellaneous and re-categorize any expenses that are categorized as Miscellaneous.
  • Ensure that no big sales or expenses are missing.  Is that new deal you closed at the end of the month captured?  Is the office rent included?
  • Utilizing the % of revenue columns, look at the detail of into your top 5 expenses.  Think critically about those top categories and evaluate whether that is bringing the most value to your business – change vendors or purchasing strategies accordingly.
  • Utilizing the % of revenue columns, review top 5 income and expenses accounts where monthly % and YTD % differences are the greatest – Again, think critically about why these differences may be appearing and what to do about it.
  • Review Gross Profit (income – cost of goods sold) – you should know what your industry standard gross profit metrics are, and shoot to beat it or at least match it
  • Review Net Income (Income – all expenses) – do you have positive net income? are you on track for the year or not?
  • Compare your budget to actual numbers – look at the differences between budget to actual and analyze the top 5 biggest differences.

Many customers are overwhelmed by this list – it is a lot to look at on your already busy schedule.  But, rest assured by taking this approach and reviewing their income statements on a regular basis, I’ve seen customers make more sales and save hundreds of thousands of dollars.  Download our income statement template
today and give us a call if you need help!

 

 

The importance of systems in operations

The importance of systems in operations
The importance of systems in operations

One of the areas that I work on with clients is setting up operations systems.  Why is this task important to so many businesses and nonprofits?  

As your organization grows, you will hire more employees, bring on more clients, and talk with more prospects.  These things will being to happen at a faster and faster rate.  Your time will begin to stretch thinner and thinner.  But you still want all these things to be done perfectly and exactly as you would do them!  How do you make that happen?  One approach is to work more hours, but who wants to do that?  The other approach is to set up operations systems.

Systems are a set of rules that govern structure and/or behavior.

Setting up operations systems or processes for your business will allow you to extend your reach without having to physically do the tasks yourself.  They will allow you to train your employees the same way every time, ensure your employees complete their responsibilities exactly as you would, and ensure that your brand is appropriately represented with vendors, clients and prospects.  

And when I say employees – I mean you!  You should also be completing your tasks according to a system.  Marketing, talking to prospects, or providing your product or service to your clients should all be documented and easily repeatable.  Setting up operations systems for yourself will lead to time savings. It will also allow you to measure your performance, tweak your processes and lead to greater results in your business.

Operations systems can range from the very simple to the extremely complex – from setting up a system to manage your own email box, to setting up a complicated software system to manage all the data of your business.

 Contact us today to see how we can help you add systems your business.

Happy Pi Day!

Happy Pi Day!Today we are celebrating Pi Day at the Mandrier Group.  We are celebrating with Pi t-shirts, books about Pi, Pi math problems and of course, pie!

As a math and computer science major, I am excited to see people get involved in holidays that celebrate the world of mathematics.  In this case I’m sure it has a lot to do with the inclusion of pie in Pi day, but nevertheless, I’ll take it!  

Pi is such an interesting concept – just think about it – every circle in the world can be defined by π = C/d.  And the even though every circle can be measured with Pi, Pi is an irrational number with infinite number of digits and with no repeating pattern.  The juxtaposition of the ability to measure every perfect circle while not being able to be truly defined itself is fascinating to me.  Just one of the many reasons that I became a math major, I suppose!

Enjoy Pi day today, do a few math problems for fun and don’t eat too much pie!