Southfield, Michigan "Income Tax" Expert answers "Business Accounting" Questions

Do you Have a Custom Designed Small Business Accounting System?

Silent Quiz:  Can You Answer These 10 Questions About Your Business?

1. Were my total sales up or down last month? Were they designated by sales category?
2. What was my total gross profit last month? Was it designated by sales category?
   
3. What is my gross profit per item?
4. What were my expenses by category last month?
   
5. Who owes me money, and how much?
6. Who's behind in paying me, and by how much?
7. How much inventory do I have, in total and by item?
   
8. Who do I owe money to, and how much?
   
9. What was my profit last month?
   
10. How Much do I Own, and How Much do I Owe?

1.  
   1. Were my total sales up or down last month? Were they designated by sales category?
      Here's why you need to know: If your sales are up, you'll need extra cash to buy replacement inventory. If your sales are down, you'll want to pull back on inventory purchases. Sales increases in a category can mean a new growth opportunity. Sales decreases need to be investigated to find out the reason.
      
      
   2. What was my total gross profit last month? Was it designated by sales category?
      Here's why you need to know: 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.
   3. What is my gross profit per item?
      Here's why you need to know: Selling prices should be based on profit goals instead of estimates. By raising the prices on some items and selling others near or below cost, you can change your inventory mix and increase gross profits. An increase of just 1% may add thousands of dollars to net profits. You can give sales incentives that will cause employees to sell the most profitable items instead of the easiest ones.
      
      
   4. What were my expenses by category last month?
      Here's why you need to know: Are payroll costs too high? What about insurance costs? The telephone? 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.
      
      
   5. Who owes me money, and how much?
      Here's why you need to know: You can't expect to get paid in full unless you tell customers exactly, and regularly, what they owe. An itemized, neatly printed and up-to-date monthly statement tells customers that you expect to be paid on time according to your payment terms.
      
      
   6. Who's behind in paying me, and by how much?
      Here's why you need to know: Customers who fall behind need to be contacted immediately and often, so 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.
      
      
   7. How much inventory do I have, in total and by item?
      Here's why you need to know: If you're running low on an item, you can reorder in advance and not be out of stock. Plus, you can avoid rush delivery charges. If you have too much of an item or of inventory in total, 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 puts you out of business.
      
      
   8. Who do I owe money to, and how much?
      Here's why you need to know: 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 getting business credit. Plus you can plan for your cash requirements and reduce the need to borrow from a bank or your own funds.
      
      
   9. What was my profit last month?
      Here's why you need to know: 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 hundreds to thousands of dollars, on year-end tax return fees, and plan for the tax bill months in advance.
      
      
   10. How much do I Own, and How Much do I Owe?
       Here's why you need to know: 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 suppliers or potential customers.

For more income tax and financial planning tips, visit Markwei Boye at http://www.smartbusinesspllc.com/

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