Monitoring business income

By Geoff Ferns:

A business is born, grows up and survives if it is valuable to clients.

 The business income and outgoings template changes over time, from a new venture to a mature business.

A rough ‘mud map’ for business income and outgoings follows.

History gives an indication of benchmarks and trends for business in a group.

A simplified template for a new business follows but get expert advice to review your particular circumstances:

Gross Income:
Is Gross income at ‘industry benchmark’ levels for the turnover?
Normalise the year’s opening balance of unpaid revenue & closing balance of unpaid revenue.

Cost estimates from the calculation in the software, must be reviewed, say quarterly, with actual costs from the 'profit & loss' accounts reports:

General expenses [variable costs are optional and can be reduced]:
e.g. Sponsorships; Advertising; Travel; conferences; lunches and contingency reserves: %

General expenses [fixed cost of doing business if you do not waste money]: %
IT costs: %

Staff - Total payments (incl super & Performance Bonus % of gross income for a new business.) for Staff & Contractors payments:
Production area cost %
Other segments %

Mature business with skilled staff & smart systems have lower staff costs than 'business startups'.

Payment splits in the area:
Management %
Admin staff %
meetings %
training %

Return on investment [dividends] to owners: 10% to 15%

At the end of each year, company tax; Payroll Tax & GST is paid.

Any surplus each year can pay Performance Bonus & Dividends and be used to build a ‘contingency reserve’ to the amount indicated after costing ‘disaster recovery’ plans.

Annual Review should be done to assess actual:
Ebit:
Gross profit %:
Profitability %: EBIT / Revenue.
Activity Ratio: Revenue / Total net assets
Return on Capital Employed %: EBIT / Total net assets.
Gross Profit Margin: rev less costs / revenue.