This post is one in a series designed to help SME businesses benchmark their business and create a best practice business improvement plan across all of their business processes. You can find the links to the full series here.
One of the critical principles behind accounting statements is that revenues are matched with the related costs of providing the products or services from which the income is derived. This means that if the business reports its results monthly, all the costs of production/goods purchased for resale/service recorded in that month are relevant to sales made in that month allowing you to understand the true return on all of your sales.
This enables the profit of the business activities to be properly measured, whether that is over a time period, by a product group, by market sector, or by customer.
How does your business measure up?
Here’s a checklist to help you determine how well your business meets this benchmark.
- We calculate the level of stock or work in progress at the end of each month.
- We ensure that all direct costs related to revenue are recorded in the same time period that the sales are made.
- We know what is the total cost of our direct labour per unit, after allowing for wage on costs, leave and non-chargeable time.
- We ensure that our overhead costs are recorded in the time period in which they are incurred
About the Author
Click on the image below for more information