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Thanks for stopping by our blog. If you visit often, you'll learn about our Issaquah cost accounting, business services, and other tax help solutions. We hope you find the content valuable and relevant. Should you have a question you would like to see answered, please drop us an email and let us know what you would like to see answered!Know Your Daily Numbers To Avoid Problems
by Brett Backues on November 2, 2015Know Your Daily Numbers - To Avoid Problems
Every business owner knows that the daily numbers for sales determines the company's financial status. Up and down numbers play havoc with a stable business picture? Sales numbers begin from the moment of contact with sales prospects. Tracking each salesperson's daily sales contacts is one way to view leads in a sales pipeline. Knowing how well sales are doing and how many orders were placed on a daily basis helps motivate employees. Closing leads should be reported in order entry reports to start the accounting track record for each closed lead. Depending on the accounting software, sales quotas should also be tracked according to each sales person and each product or service sold. This allows the business owner to "measure" sales progress in a comprehensive by salesperson/sales product/service mode. Each business owner should ask, "What do I want to measure today?" at the start of each business day. The answer to this question can be provided by the accounting manager or CFO.
Specifying Sales Transactions
In some businesses, labor is a billable. It may be billable through a 1099 for outsourced labor or it may be billed on an in-house basis for field service technicians who may perform labor onsite or offsite at a select number of clients each day. Billable hours vs. non-billable hours are reported in Accounts Payable under a defined account number in the chart of accounts. This will depend on the set up of General Ledger that creates a picture of the financial practices of the business. It may also depend on the regularity with which billable and non-billable hours are posted to the system.
Accounts payable may also have different designations for terms of payment based on the type of business. For example, legal firms post billable hours and non-billable hours to extract the precise cost of legal services. A steel fabricator will submit invoices with the standard Net 30 payment terms. Today's business accounts software allows for daily monitoring of bills to be paid by the purchasing company. However, sales staff should provide the information needed to define the type of sales, taxable, non-taxable, billable or non-billable since they are the first line of contact with customers. The purchasing department should also track business purchases daily to help management assess actual cash flow.
Accounts Receivable and Income Statements
Most financial software today has the capacity to provide links between each financial transaction such as sales, order entry, accounts payable, accounts receivable, purchasing, inventory control, payroll and general ledger. There is a direct reporting link between receivables and the weekly or monthly income statement. A quick overview of the daily accounts receivable report helps "eyeball" the daily break even status. When customers pay for products and/or services, this is returned to the business as income and is reported on income statements as gross and net income, depending on how the software application was designed for reporting.
Vigilance on Daily Expense vs. Daily Income
Think of payables as a subtraction sign and receivables as a "plus" sign. Payables can be a daily expense like those incurred by sales for mileage, fuel and automobile depreciation. Other daily expenses can be attributed to training or regular sales presentations at various venues. Daily income may be increased by faster turnaround time on collection of debts owed by customers, retail sales or sales made during sales visits. A daily income statement will clarify cost of sales, business operation and miscellaneous expenses, as well as the asset side of the finances of the business and the flow of incoming revenue from sales.
Regular Review of Your Gross Margin
The effect of sales on businesses has the most impact on business finance. In retail sales, tracking of sales by salesperson and product is as important as sales for long-term projects like those in construction or engineering. Outside sales is similar to retail sales in tracking each step with the exception that outside sales may not be as quick to enjoy a closed sale.
In construction and engineering, profits and losses are tracked in phases. In these industries, a proposal is issued to the client outlining the scope of work, the responsibilities of the client and the vendor, a detailed outline of work to be done, schedule and terms of payment and a proposal requiring the client and vendor's mutual agreement. The proposal may also include a warranty and/or performance guaranty. In certain proprietary proposals, a Confidentiality Agreement might also be included. The gross margin refers to actual profit as revenue after all expenses have been paid. The gross margin equation is total sales revenue minus the cost of goods sold. Gross margin is divided by total sales revenue to arrive at a percentage of profit. That percentage is the dollar amount the company has earned as profit.
Which Daily Reports Help to Know Your Numbers?
A business owner should be availed of several financial reports in order to form a clearer understanding of the progress and growth of the business. These should include a custom report that includes sales progress, profit and loss and net income.
backEvery business owner knows that the daily numbers for sales determines the company's financial status. Up and down numbers play havoc with a stable business picture? Sales numbers begin from the moment of contact with sales prospects. Tracking each salesperson's daily sales contacts is one way to view leads in a sales pipeline. Knowing how well sales are doing and how many orders were placed on a daily basis helps motivate employees. Closing leads should be reported in order entry reports to start the accounting track record for each closed lead. Depending on the accounting software, sales quotas should also be tracked according to each sales person and each product or service sold. This allows the business owner to "measure" sales progress in a comprehensive by salesperson/sales product/service mode. Each business owner should ask, "What do I want to measure today?" at the start of each business day. The answer to this question can be provided by the accounting manager or CFO.
Specifying Sales Transactions
In some businesses, labor is a billable. It may be billable through a 1099 for outsourced labor or it may be billed on an in-house basis for field service technicians who may perform labor onsite or offsite at a select number of clients each day. Billable hours vs. non-billable hours are reported in Accounts Payable under a defined account number in the chart of accounts. This will depend on the set up of General Ledger that creates a picture of the financial practices of the business. It may also depend on the regularity with which billable and non-billable hours are posted to the system.
Accounts payable may also have different designations for terms of payment based on the type of business. For example, legal firms post billable hours and non-billable hours to extract the precise cost of legal services. A steel fabricator will submit invoices with the standard Net 30 payment terms. Today's business accounts software allows for daily monitoring of bills to be paid by the purchasing company. However, sales staff should provide the information needed to define the type of sales, taxable, non-taxable, billable or non-billable since they are the first line of contact with customers. The purchasing department should also track business purchases daily to help management assess actual cash flow.
Accounts Receivable and Income Statements
Most financial software today has the capacity to provide links between each financial transaction such as sales, order entry, accounts payable, accounts receivable, purchasing, inventory control, payroll and general ledger. There is a direct reporting link between receivables and the weekly or monthly income statement. A quick overview of the daily accounts receivable report helps "eyeball" the daily break even status. When customers pay for products and/or services, this is returned to the business as income and is reported on income statements as gross and net income, depending on how the software application was designed for reporting.
Vigilance on Daily Expense vs. Daily Income
Think of payables as a subtraction sign and receivables as a "plus" sign. Payables can be a daily expense like those incurred by sales for mileage, fuel and automobile depreciation. Other daily expenses can be attributed to training or regular sales presentations at various venues. Daily income may be increased by faster turnaround time on collection of debts owed by customers, retail sales or sales made during sales visits. A daily income statement will clarify cost of sales, business operation and miscellaneous expenses, as well as the asset side of the finances of the business and the flow of incoming revenue from sales.
Regular Review of Your Gross Margin
The effect of sales on businesses has the most impact on business finance. In retail sales, tracking of sales by salesperson and product is as important as sales for long-term projects like those in construction or engineering. Outside sales is similar to retail sales in tracking each step with the exception that outside sales may not be as quick to enjoy a closed sale.
In construction and engineering, profits and losses are tracked in phases. In these industries, a proposal is issued to the client outlining the scope of work, the responsibilities of the client and the vendor, a detailed outline of work to be done, schedule and terms of payment and a proposal requiring the client and vendor's mutual agreement. The proposal may also include a warranty and/or performance guaranty. In certain proprietary proposals, a Confidentiality Agreement might also be included. The gross margin refers to actual profit as revenue after all expenses have been paid. The gross margin equation is total sales revenue minus the cost of goods sold. Gross margin is divided by total sales revenue to arrive at a percentage of profit. That percentage is the dollar amount the company has earned as profit.
Which Daily Reports Help to Know Your Numbers?
A business owner should be availed of several financial reports in order to form a clearer understanding of the progress and growth of the business. These should include a custom report that includes sales progress, profit and loss and net income.
