Читать книгу Financial Accounting For Dummies - Maire Loughran - Страница 67

In the wonderful world of accounting software programs, the drudgery of manual accounting frees up a small business owner’s time to do some meaningful analysis of revenue and expenses. In Figures 3-1 and 3-2, you can see that the income statement shows financial results for the period it represents; it lets the user know in the short term if a business is making money. More importantly, the relationship between the different accounts on the income statement clues the business owner to areas needing improvement.

For example, looking at the income statement for Keeping It Cheap, salaries are $50,000, and the bottom-line net income is $30,255. While Maggie’s pop-up shop is open for only two and half months (January 31 through April 15), Maggie works at her business year-round.

There is all the prep work before tax season starts. Maggie takes continuing education classes to get up to date on the changes in the tax code. She finds and negotiates the rent on an appropriate location, which may change year-to-year, and sets up an aggressive advertising campaign.

Just because it’s April 16, Maggie’s work is not done. There are always follow up telephone calls with customers about the status of their refund. Or the customer may have gotten a letter from the Internal Revenue Service, which Maggie has to address.

Looking at the $80,255 ($50,000 + $30,255), do you think this is reasonable compensation for working all those long hours during tax return plus the preparation and aftercare? Would your opinion change if you found out that Maggie has an employee to whom $45,000 of the wages was paid, thus reducing the net to Maggie to $35,255 ($80,255 –$45,000)?

Another consideration is how many returns Maggie had to prepare to earn the $80,255. It is easy to reckon you are making money if you have a solid balance in the company checking account. However, you need to see the figures on an income statement to really be able to evaluate how well your service type business is doing.

Moving onto Izzie Tees and Jeans income statement, the No. 1 evaluation is checking cost of goods sold by figuring the gross profit margin, which is cost of goods sold divided by net sales. I know from experience that most retail shops use a keystone approach to pricing goods for sale.

Keystone means the shop applies a 100 percent markup. If you’ve never worked in retail, this is probably confusing. I’ll walk through an example:

Izzie buys 10 pairs of dark blue jeans from the manufacturer for $20/pair or $200 in total. Using a keystone margin, Izzie marks the jeans by the cost of the jeans. The jeans go on the rack for $40 ($20 + $20).

In my experience, it is very difficult to keystone t-shirts. Generally, their cost from the manufacturer or wholesale doesn’t allows for much retail markup wiggle room. Keeping that fact in mind, let’s figure Izzie’s profit margin to see how close she is coming to the keystone margin.

Net Sales = $143,450, and cost of goods sold = $65,180. Following the formula of cost of goods sold/net sales, Izzie’s profit margin is 45 percent. Izzie also has a sales report detailing sales by category. Based on the volume of jeans versus tees sold Izzie is happy with this profit margin.