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Key Performance Measurement Systems
It has been said
that "you can't improve what you can't (or don't) measure". I have found
that many businesses owners that are in a distressed situation simply
don't have a way of looking at their financial statements in a
meaningful way.
The following report
is called a "Management Income Statement". It is derived from the
standard Income Statement that all businesses receive from their
accountant or reporting system such as Quick Books.
As you can see
however, there are a number of differences in this format which will aid
the leadership team in determining what areas need further attention.
Those differences are:
·
Comparison with prior reporting periods.
·
Expenses are broken into variable and fixed so that a breakeven analysis
can be conducted.
·
%
Contribution Profit Margin is calculated.
·
Breakeven Point is calculated with a variance in actual sales listed.
In order to get a
wonderful insight into the financial condition of your business, I
strongly recommend that you reformat you current financial statements
into the Management Income Statement.
|
Category |
1st-3rd Q-00 |
|
1st-3rd Q-01 |
|
1st-3rd Q-02 |
|
|
|
|
|
|
|
|
Net Sales Revenue |
$722,683 |
|
$720,576 |
|
$627,039 |
|
|
|
|
|
|
|
|
Variable Expenses |
|
|
|
|
|
|
Purchases |
($198,102) |
|
($185,972) |
|
($176,169) |
|
Credit Card Fees |
($7,941) |
|
($8,184) |
|
($5,492) |
|
Shop Supplies |
($4,738) |
|
($3,655) |
|
($8,092) |
|
Equip. Rental |
($66) |
|
($2,000) |
|
$0 |
|
Outside Services |
($24,629) |
|
($33,436) |
|
($16,588) |
|
Repairs & Maint. |
($4,693) |
|
($3,950) |
|
($2,443) |
|
Subtotal |
($240,169) |
|
($237,197) |
|
($208,784) |
|
|
|
|
|
|
|
|
Contribution Profit Margin |
$482,514 |
|
$483,379 |
|
$418,255 |
|
% Contribution Profit Margin |
66.77% |
|
67.08% |
|
66.70% |
|
Fixed Operating Expenses |
|
|
|
|
|
Direct Labor |
($157,176) |
|
($206,763) |
|
($163,238) |
|
Officer Salary |
($86,519) |
|
($53,341) |
|
($63,989) |
|
Payroll Taxes |
($19,129) |
|
($20,480) |
|
($15,299) |
|
Advertising |
($10,737) |
|
($15,170) |
|
($9,464) |
|
Contributions |
($18,443) |
|
($19,830) |
|
($5,671) |
|
Depreciation |
($45,000) |
|
($42,500) |
|
($37,500) |
|
Insurance |
($31,810) |
|
($35,157) |
|
($28,881) |
|
Rent |
($79,052) |
|
($91,084) |
|
($74,253) |
|
Subtotal |
($447,866) |
|
($484,325) |
|
($398,295) |
|
Miscellaneous Fixed Operating Expenses |
|
|
|
|
|
|
Small Tools & Equip. |
($15,579) |
|
($11,080) |
|
($1,979) |
|
Gas, Oil, Tires |
($8,641) |
|
($7,479) |
|
($3,313) |
|
Legal |
($1,252) |
|
($5,192) |
|
($927) |
|
Office Expense |
($8,007) |
|
($5,137) |
|
($1,734) |
|
Telephone |
($6,800) |
|
($5,059) |
|
($3,800) |
|
Utilities |
($1,515) |
|
($9,686) |
|
($5,618) |
|
Subtotal |
($41,794) |
|
($43,633) |
|
($17,371) |
|
Other Fixed Operating Expenses |
($17,575) |
|
($28,507) |
|
($17,433) |
|
Total Fixed Operating Expenses |
($507,235) |
|
($556,465) |
|
($433,099) |
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
($24,721) |
|
($73,086) |
|
($14,844) |
|
Interest Expense (less Interest Income) |
($12,703) |
|
($14,277) |
|
($9,912) |
|
Gain (Loss) on Sale of Assets |
$6,560 |
|
($12,011) |
|
$0 |
|
Income Tax Provision |
|
|
|
|
($300) |
|
NET INCOME (LOSS) BEFORE TAX |
($30,864) |
|
($99,374) |
|
($25,056) |
|
|
|
|
|
|
|
|
Breakeven Point |
($778,735) |
|
($850,809) |
|
($664,152) |
|
Variance in Actual Sales |
($56,052) |
|
($130,233) |
|
($37,113) |
|
|
|
|
|
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