or reach us by email: ron@collier-consulting.com
What can PT really do for my business?
Most businesses do not have a
business plan that consists of a budget and cash flow projection for
the company. PT will create annual and monthly budgets and projections.
In addition PT can help you price jobs.
Why do a cash flow projection?
Most businesses fail because they cannot pay their bills. They do not
fail from a lack of sales or customers. It is imperative for a business
to function that they can pay their bills each and every month.
What is Return on Investment?
Budgets should be created from the profit viewpoint, not from sales.
Return on Investment (ROI) focuses on how much money the company wants
to make on its assets. The earned monies is called profit.
Can
PT help me determine my breakeven for inventory and labor sales?
Yes, PT uses the dual overhead formula to calculate the overhead burden
for both inventory that you sell and labor (like service or install)
that you sell. Breakeven is the cost of an item that you sell plus the
overhead (handling charge) that the company needs to make a profit of
$0. Add profit to breakeven, and you have a selling price.
Where do I get my values needed to start ProfitTracker?
You really need your last year's profit and loss, last year's balance
sheet, and monthly sales values for the last 12 months.
What's
the difference in profitability and cash flow?
Profitability is shown on the income or profit/loss statement and the difference
between sales and costs. Profitability is the result of sales activities revealing
if you made or lost profit. Profitability exists on paper and not necessarily
at the bank. One might show a profit of $1000 one day, but the monies may not
be in the bank that day. Cash flow is the actual monies being deposited and withdrawn
at the bank on a daily, weekly, or monthly basis. It is the money you have to
spend for the costs of sales, loan payments, etc.
What
cost items go in "Costs of Goods Sold"?
Look at the category name, "Costs of Goods Sold". It is not "Cost of Goods Bought".
These are items I purchased and have sold to someone. Typically, these items
can be broken down into five (5) categories: Costs of Material Inventory Sold;
Cost of Equipment Inventory Sold; Miscellaneous Costs such as specific insurance
for jobs, permits, etc.; Cost of Subcontract Labor, and Cost of Field Employee
Labor. Also, all costs in this category can be traced directly to specific jobs
or job costed to specific jobs.
What
is overhead?
Overhead is the sales expenses that are generic in nature. Expenses that are
used to support the costs of goods sold are typically broken into "fixed" and
"variable". Overhead expenses are difficult to tie directly to any specific sale
or job. For example, the office person's salary cannot easily be divided among
departments or jobs.
Where
do owners' salaries go?
Depending on the business structure, corporate salaries go into Fixed Overhead.
If you are a sole proprietor, you take a draw. Draws are shown on the profit/loss
after the line of Profit.
Which
is better, Sole Proprietor or Corporation?
Corporations are the better business structure. As a corporation, you as an owner
work for the company as an employee and are entitled to all benefits offered
to employees. Also, if a lawsuit occurs against the corporation, you probably
are not held liable because you are an employee like everyone else. |
