The better management and review of your sales and costs data can be a powerful way for you to gain unique insight in to your business, to help you in making better financial and strategic decisions on maximising profit.
This unique information can give you knowledge on if whether your current and historical decisions are moving your business towards your ultimate business objectives, such as increasing profit by x%, or reducing costs. This real-time information on your financial position will help you in making better future decisions that will support you in meeting your business objectives.
Controlling risk is key and that is exactly what this simple log I have created helps you to do. It does this by recording every sale, with associated details and every cost/expense with associated details. It then uses the simple formula as below to calculate your gross profit.
- Profit = Revenue – Costs
Your Gross Profit is outlined in the Sales tab and incorporates sales, costs and forecasted costs.
It’s an editable Excel spreadsheet and you are able to add or delete columns as you wish, but if you think the log needs more, then drop me a message. I’m continuously reviewing my posts and would be very pleased if you did this.
I can tell you with confidence that this system has helped me to better manage my business, by equipping me with the information in an accessible format that is functional, instead of my old folder full of receipts and invoices, that I had to search through and manage manually, which was a serious headache; you probably know the feeling. By treating this log as a live document, keeping it regularly up-to-date, some of the reasons it has come in handy are as follows:
- Real-time Information on how much my profit is relative to my sales and costs
- When it comes to completing my Tax Return, I don’t have to dig out all of my receipts at the end of the year and struggle to read them through the degradation of quality of my receipts.
- I also know that for every transaction listed in the calculator, I will either have or not have a corresponding receipt.
- It allows me to search through my transactions i.e. I don’t have to manually search through my receipt file for a transaction – I can search by any field of a record.
- It acts as a reference point for future expenses; If I want to go back to remember how much I spent on a drill in 2009 for example, I can do this very easily by using the CTRL+F search functionality.
- It records all details related to all transactions, with notes. If I have something I want to remember later on, I can simply write it in the notes section. I will also have information on how the customer paid, what date they paid and more.
- I can see who my main customers are. By using the sort functionality in the spreadsheets, I can sort by customer and with a simple calculation, work out their average spend with me.
- It helps me to model scenarios – I sometimes put it sales figures that I would like to achieve and see how this affects my profit; I do the same for costs too.
The log helps me in making strategic decisions ranging from reducing my spend on expenses or giving me important information on who my main customers are, to allow me to concentrate on them; we all know the 80/20 rule, right? It gives me knowledge on performance and what services of mine are most popular; this information allows me to develop ancillary services that relate to the popular services.
It’s best to use this log as a live document you keep up-to-date on a regular basis. It may takes couple of uses to get used to inputting data, but once you’re in the flow of things, you won’t be able to live without it.
Take some time in getting to know the spreadsheet before using it. There are some example entries in the spreadsheet, which you can delete.
Have fun in managing a better business.