Your Current Bookkeeping System – 10 Questions
Were my total sales up or down last month?
Were they designated by sales category?
If your sales are up, it may indicate that your marketing is successful. If your sales are down, you may want to change your marketing approach. Sales increases in a category can mean a new growth opportunity. Sales decreases need to be investigated to define the reason for the loss.
What was my total gross profit last month?
Was it designated by sales category?
Gross profit shows the profit left from sales after subtracting the cost of the products or services you sold. Changes in gross profit show whether your pricing strategies are working. Cutting prices to increase sales can hurt you if it reduces your gross profit.
What is my gross profit per item?
Selling prices should be based on profit goals instead of estimates. By raising the prices on some products or items and selling others near or below cost, you can increase gross profits. An increase of just 1% may add thousands of dollars to net profits. You can give sales incentives that will allow you to sell the most profitable products or items instead of the easiest ones.
What were my expenses by category last month?
Are certain service-related costs too high?
What about other costs, such as insurance and utilities? In order to cut back on expenses, first know which ones are out of line. Recording your expenses each month ensures that you get the maximum tax deductions.
Who owes me money and how much?
You can’t expect to get paid in full unless you tell customers exactly what they owe. An itemized, neatly printed, and up-to-date monthly statement tells customers that you expect to be paid on time and according to your payment terms.
Who is behind in paying me and by how much?
Customers who fall behind need to be contacted immediately and often so that it doesn’t become a habit. Also, before you approve a new order from a customer, you’ll want to know if that customer paid you on time for the last order.
How much inventory do I have: in total and by item?
If you’re running low on an item, you can reorder in advance and never run out. Plus, you can avoid rush delivery charges. If you have too much of one item, or too much inventory in general, you can cut back on your inventory investment. Also, you can compare a physical count to the books and identify a shortage problem before it threatens to put you out of business.
To whom do I owe money and how much?
Many vendors offer discounts for paying bills in less than 30 days, which can add up to big savings on an annual basis. Paying your bills on time will increase your chances of qualifying for business credit. Plus, you can plan for your cash requirements, and reduce the need to borrow from a bank or your own funds.
What was my profit last month?
A monthly profit figure gives you the financial bottom line, and lets you know where you’ve been and where you’re going. Plus, you can save thousands of dollars, on year-end tax return fees, and plan for taxes in advance.
How much do I own, and how much do I owe?
Keeping track of your current assets and liabilities allows you to plan for your cash needs, and helps you stay in compliance with loan agreements. Plus, you’ll be instantly ready to respond to questions from vendors or potential customers.
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