Tuesday, July 21, 2015

What do your finances tell you?

Beth VadeBonCoeur,
What do we care about the most when finances are concerned? The bottom line. Are we making any money? The only sure fire way of getting that answer is by reviewing our financial statements on a regular basis. One financial statement in particular is our income statement or sometimes referred to as our Profit and Loss statement (P & L). This statement shows the following equation: Sales – Expenses = Net Income.

Financial statements should be understandable, relevant, reliable and comparable. Do you have your income statement set up so it’s giving you the needed information? It’s important to design your financial statements so that managers are getting the detailed information needed in the important segments of your business to make better management decisions.

On the revenue side, sales should be broken down into sales categories that allow management to determine what segment of the business is growing or declining. It allows management to see which segments provide the most and least amount of revenue.

On the expense side, expenses should be categorized by cost of goods, administrative and selling.  Within each category decide which expenses are relevant and significant to the business and make sure they are listed separately.

When your income statement is designed effectively, management will have the key financial data available on the income statement to better run the company.

This article originally appeared in Modern Memorialization, Trigard Memorials' weekly electronic newsletter featuring information for the funeral industry. Sign up for your free subscription at http://www.trigard.com/thursdays.

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