This mid-month statement will overstate income and understate expenses. For instance, if your business records most of your sales in the first 7 days of the month but does not record expenses till after the 20th of the month. The periods are usually stated in monthly, quarterly, or annual terms.
An income statement a.k.a. A mid-month statement can misrepresent the data. Profit & Loss, is a summary of income received and expenses reported during a stated period.
Income can be subcategorized by type of sales. For example a fish store could have: Freshwater Fish, Saltwater Fish, Equipment, Tank Supplies, and Food. Breaking down income this way at the end of the period helps the owner look at her Income Statement and know the dollar total of each type of sale. Another tool is to know what percentage of your sales come from new customers versus existing customers.
One common mistake is to track income that is not earned by selling your business product or service in the income section of the statement; e.g. sales of assets, loan deposits, or tax refunds. Loan deposits are tracked on the balance sheet. Other income generated from other business activity such as gain on sale of assets and tax refunds is reported at the bottom of the statement after expenses in the area reserved for non-operational income.
When is a sale really a sale?
A cash accounting method records the sale when the customer pays. An accrual method records the sale at the time the customer order is confirmed. Payment is handled separately on the balance sheet against the receivable generated from the sale. Why is this an issue? The accrual method attempts to match a sales income with its expenses to better determine if the sale was profitable. Cash accounting tracks sales and expenses as they are paid by your customer or you making it harder to determine if the sale was profitable.
When printing out your P&L use the feature (within software) called percent of income. What this does is divide each account for income and expenses by the total sales for the period. Monitoring this percent allows you to compare periods regardless of the amount of the income or expense. For example, if sales for the month are 50,000 for January and your payroll is 10,000, then 10,000 divided by 50,000 equals 20%. This translates to: for every dollar of sales you spend 20 cents for payroll. The next month your sales are 40,000 and your payroll is still 10,000. 10,000 divided by 40,000 equals 25% or for every dollar of sales you spent 25 cents for payroll. You can see how knowing the percent of income can be a valuable management tool.
Top Tips And Tricks For All Your Home Improvement Projects
Do you have memories of the days when you were just starting your home business? At the time, I bet you did a ton of research. Time has passed since then and it is time for a refresher. Use the information in this article to capture that same excitement.
Take breaks during your working hours, but do not do anything too personal that could take you away for too long. Avoid using the phone too often for personal reasons, and don’t start any complicated home projects that might cut into your work time. Both your body and mind will feel refreshed from physical breaks. For instance, do a bit of exercising or gardening.
Prior to launching a business, be certain to have dedicated office space. This may not seem that important, but it is hard to stay motivated if you don’t have the proper setup.
Try to keep your personal appearance up at home the same as you would when working in an office environment. Everyone dreams of having a home-based business, but you can really dampen your self esteem if you always place work before taking care of youself. You should take your showers in the morning, limit the amount of snacks you consume, and always make the time to get exercise. These tips can boost your view of yourself as well as how others see you!
Before you sell your product, do some research to see what the current price points are for your product in the market. Price the item or service as offered by your competitors, and aim your price just slightly lower. Negative speech about your competitors will not generate business. If your product or service is sound, proclaim its benefits.
In conclusion, you want to have the same fired-up enthusiasm about your home business that you had when you first started. Maybe you need a little motivation to get you back on the path to success, or simply need to remember long forgotten information. This article should help you on your way.…