40 posts categorized "Profit Improvement Tips"

My Favorite Tech Tools

Looking for ways to work more efficiently and get more done in less time?

ToolBoxI wanted to share the following list of tech tools I use in my business that have helped me do both! The various apps below are used frequently to help me provide QuickBooks and CFO services to clients all over the country.

Hope you find them helpful!

Please be sure to let me know what tools you are using to help your business succeed. Just drop a comment in the box below - look forward to hearing from you!

 

  • Remote access to office computers - GoToMyPC
  • Automated bill payment with full sync to QuickBooks - Bill.com
  • Screen captures and editing - SnagIt
  • Mobile version of my web site - Duda

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QuickBooks Cost of Goods Sold - Where Does the Number Come From?

I have been fielding many questions lately about the cost of goods sold line on the profit and loss report in QuickBooks.

Time to take a closer look...

For this article, we'll focus on inventory parts and inventory assembly items in your QuickBooks.

IN THE BEGINNING...

When you created your inventory part or inventory assembly item the very first time in QuickBooks, you had to tell it what "COGS Account" (COGS = Cost of Goods Sold) to use. See the example screen shot below:

When this item appears on an invoice or sales receipt in QuickBooks, the instructions above tell it to post to the 50100 - Cost of Goods Sold Account each and every time. No exceptions (your business may only use account names and not numbers - that is just fine).

WHERE DOES IT GET THE AMOUNT?

As we know, for every transaction in QuickBooks, there is not only a ledger account but also an amount that has to post.

Much confusion exists as to where QuickBooks pulls the actual amount that gets posted to the COGS account.

Here's the scoop...

For inventory parts and assembly items, QuickBooks pulls from the value in the "average cost" field to fill in the cost of goods sold amount when the invoice or sales receipt is completed. See the screen shot below:

In the example above, if 2 of this particular item were sold on an invoice or sales receipt, a total of $6 would post to the 50100-Cost of Goods Sold account.

Keep in mind that this is an average cost - it is not a FIFO, LIFO, Standard or Landed Cost.

DON'T BE FOOLED

Many have been mistakenly led to believe that the cost that posts to the COGS account is not the average cost amount, but rather, the amount showing in the generic "Cost" box. See the screen shot below:

This understanding is not true. The generic "cost" box is more of a "management cost" type of box that is either updated manually or when purchase orders are created.

UNDERSTANDING THE PROFIT AND LOSS

My hope is this brief lesson will help you have a better understanding of the activity that is showing up in the cost of goods sold account on your QuickBooks profit and loss report.

Of course, other transactions such as bills or credit card entries can also post into the COGS account, but understanding how inventory parts and assemblies post will be a big plus to help you manage your business...

RELATED POSTS:

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Time to Trash Your Multi-Colored Pack of Highlighters?

Ok, be honest...

When it comes to tracking your accounts receivable, you've probably got a well refined color coding system using your highlighters week in and week out on tens or even hundreds of pages of your aging reports, right?

It's very likely this system is actually costing your business a lot of money...

DIALING FOR DOLLARS

Open invoices are the foundation for future inbound cash for your business. It is essential to have a really solid and efficient system in place for tracking them.

QuickBooks is great at providing the core reports you need to see the big picture with your receivables.

Unfortunately, QuickBooks is not so great (some have said even worse things!) when it comes to the day-to-day follow-up that is crucial for an effective accounts receivable management system.

ANYTIME COLLECT TO THE RESCUE

What if you could have a system that automatically pulls data out of QuickBooks, and then gives you a completely modern set of tools to automate your accounts receivable collections process?

You can!

I was so impressed with the Anytime Collect accounts receivable management software for QuickBooks that I recently signed on as a referral partner with them.

TOOLS YOU NEED FOR EFFECTIVE RECEIVABLES MANAGEMENT

Anytime Collect comes pre-loaded with the following (this is just a short list of all the ways it can help you trash your pack of highlighters):

  • Action Center - a tool that tells you who to call, when to call, what invoices are involved, etc. According to Paystream Advisors, this allows up to a 300% increase in the amount of time you spend on actual collections compared to businesses using a manual system. Just imagine how that translates into better cash flow!

  • Communication Center - allows you to manage every piece of communication (phone, e-mail, fax, carrier pigeon - ok, just kidding about that) in one place.

  • Dashboard/Intelligence Center - a live snapshot of just what is happening within each piece of your accounts receivable management processes and procedures.

  • Full integration with QuickBooks - no double-data entry needed.


LEARN MORE ABOUT ANYTIME COLLECT

If you're looking to slash the amount of cash your business has tied up in accounts receivable or find ways to get more collections work done in less time, Anytime Collect needs to be on your radar...

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Building Better Business Finances: The Profit and Loss by Job Report

The profit and loss by job report in QuickBooks can bring a whole new (and better!) vision to your business when it comes to tracking revenues and expenses by job or project.

Here is a screen shot of a sample report (found by clicking Reports > Company and Financial > Profit and Loss by Job):

As you can see, this report provides the profit and loss report layout you've seen before, but the columns are now broken out by job/project. This particular sample report was filtered for just one customer and their jobs for easy reference. Some businesses may even refer to this as their "job costing" report.

In order to make this profit and loss by job report work properly, each income transaction (i.e. invoice or sales receipt) needs to be tagged with the correct job, and each expense transaction (i.e. bill, check, credit card charge, etc.) needs to be tagged correctly as well.

Need more details behind a value in the report? Like any other report in QuickBooks, simply hover over the number and double-click on it to drill down into the next level of details.

OTHER BUILDING BETTER BUSINESS FINANCE ARTICLES:

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Working Too Many Evenings and Weekends?

If you love owning or running a small business, but are growing weary of the insanity it can cause, you'll be interested in the concept of lifecycle marketing.

Infusionsoft has put together a great series that will show you how to own your time and have a thriving business as well.

This video series is completely on-demand - view it on your schedule!

 

ADDITIONAL WAYS TO GET MORE DONE IN LESS TIME...

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Today is an Awesome Day to...

Run your QuickBooks profit and loss report to see how your business is doing.

To me, this report is one of the three most critical reports you should be monitoring on a regular basis. The other two? Your accounts receivable report and a cash flow report.

If your business only gets a profit and loss report (aka income statement) when your CPA hands you a wad of papers at tax time, you're really, really missing out.

Without hesitation, your profit and loss report should be reviewed on a monthly basis.

ACCESSING THE PROFIT AND LOSS REPORT

Getting there is easy - click Reports > Company and Financial > Profit and Loss Standard. You'll see something that looks like this:

Now come the hard parts of dealing with your income statement:

  • Making sure the information in the report is accurate
  • Trying to figure out what it means (in something other than accounting-speak!)

GET THE HELP YOU NEED TO MAKE SENSE OF IT ALL

Knowing that you aren't an accountant (and likely don't want to be!), I've created two easy ways to get you the help you need to manage (and improve!) your finances.

Take a closer look my solutions:

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Get Your Customers to Take Action - But How?


So you have a web site out there...

Maybe you've tweeted or even Facebooked a bit.

Sadly, your traffic count is similar to that on a dark, backcountry highway at 3am.

How do you get customers (or potential customers) to take action?

Download this free guide from Infusionsoft on how to get your customers to take action.

MORE MARKETING TIPS:

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How Do Your Small Business Expenses Compare to the National Averages?

Ever wonder how your business expenses stack up against the averages?

Thanks to this infographic from the team at Shoeboxed.com, you can do a quick and easy comparison (click for a larger image):

image from bit.ly

 

Looks like these businesses could use some help with their expense tracking too, seeing that 34% of their expenses were classified as "uncategorized"!! If that includes you, let's talk about how to use QuickBooks to get things classified correctly.

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Building Better Business Finances: Profitability by Product Report

The manufacturing and wholesale edition of QuickBooks has several reports that aren't found in the other versions of QuickBooks.

One of those is the "Profitability by Product" report located by clicking Reports > Manufacturing and Wholesale Reports.

Here is a screen shot of the report (click the image for a larger view):

Profitability by Product Report Version 2

This report makes it easy to see the following details about inventory items, assemblies, and even non-inventory parts:

  • Total revenues by part
  • Total costs by part
  • Gross margin by part in dollars
  • Gross margin by part in %

Note that this report is similar to the "Sales by Item Summary", but that report does not show the total costs for non-inventory parts, and the layout of the report is quite different.

Hope you find the "Profitability by Product" report to be helpful in your business!

RELATED INFORMATION:

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Building Better Business Finances: The New Crowdfunding Twist on the Old Bank Loan

According to Wikipedia, the definition of crowdfunding can be either:

  • The collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.
  • The funding of a company by selling small amounts of equity to many investors.

According to many small businesses, crowdfunding is the new alternative in business financing, leaving the concept of a traditional bank loan in the dust.

ONE IDEA, MANY INVESTORS

Instead of getting a traditional bank loan where the bank is the only "investor" in the business, the world of crowdfunding brings many potential investors into the business. Each of those investors has a much smaller share of the investment.

Here is an article that describes some crowdfunding success stories so you can better understand how the concept works with some real life examples.

Granted, this concept isn't for all businesses - there are simply some that don't have the products or services to attract these types of investments. However, as the article describes, crowdfunding can be a game changer for others.

Like many other things relating to business, this concept is not without its' risks, so be sure to understand them carefully before taking on your own funding project.

ADDITIONAL RESOURCES ON CROWDFUNDING:

COULD THIS BE YOU?

What's your take on this new approach to financing small businesses? Have you done a crowdfunding project yourself or know of a business that has?

Feel free to share your thoughts and comments in the box below!

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