Predicting Your Income Using Statistics
The key stats bookkeepers track may vary from industry to industry. However, there are a few universal stats that every business owner or bookkeeper needs to be informed on.
Fixed Costs and general Overhead costs are vital to make sure your revenue grows.
Usually, the bigger your revenue, the bigger the Cost of Goods Sold (COGS). COGS includes only the cost of the materials and the cost of labor directly used to create the good. COGS doesn't account for any other Overhead, Distribution costs, or Marketing. But your rent, utilities, and office supplies will likely stay roughly the same from month to month.
So, the equation for Gross Profit is as follows:
Let's say you're looking for more of a comparison type of statistic to track. Checking your historical bookkeeping data is the first step when looking for answers related to variances in revenue. There's many questions you can ask to find out the cause.
Is there a logical reason revenue has changed so much?
What happened between last year and now?
Have you sold more or fewer products?
What about the Return on Investment that you've put into the business? What's working and what isn't?
Return on Investment (ROI) is also a vital part of the financial picture. A lot of times you hear about ROI in terms of a marketing campaign. If you run an ad on Google for a week, what was the real impact of that ad? Did it send new customers your way? Or was it ineffective? Calculating Return on investment is a simple set of just three equations.
Total Gains - Total Investment = A
A / Total Investment = B
B*100 = ROI %
If you're accounting for every dollar, but you're spending inefficiently or not maximizing profits, it's time to make a change. Regularly checking on your ROI and COGS can help you have a better idea of how to grow your business with specific data to back it up.