1. WHY DO FIRMS KEEP BOOKS?
Calculate tax liability?
~ or ~
Make more money?
LABRUM ACCOUNTING SERVICE
Joseph Labrum, CDA
LabrumAccntg @gmail.com ~ 206-715-8067
2. TO CALCULATE YOUR TAXES
You only need to know…
Profit (or loss) - to pay income tax.
Gross sales revenue - to pay Excise/B&O tax.
Employee hours and pay - to pay payroll taxes.
Asset inventory - to pay personal property tax.
Statistical data we get from basic bookkeeping is just
“history”.
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3. TO MAKE MORE MONEY
You need to evaluate revenue and profit and make
strategic decisions for improving performance.
You need more than just Historical Data because it
only tells what has already happened.
It doesn't tell what is going to happen.
You need to evaluate it.
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4. EFFECTIVE BUSINESS MANAGEMENT
REQUIRES VISION
Managing a business with only historical data is like
driving a car with only a rearview mirror.
When you add a plan and comparative reporting, you
add a dashboard and a windshield to provide forward
visibility.
5. TO ILLUSTRATE…
ABC company is an Architectural firm with a staff of
seven.
The bookkeeper uses QuickBooks to manage the
business and meet tax obligations.
But they don’t have the accounting expertise in
house to develop an operating plan.
The partners learn from the 1st half financial review
meeting that…
6. ACTIVITY FOR THE 1ST $200
HALF YEAR Revenue
$180
It looks like the $160
business performance $140
has been positive. But
there are questions… $120
$100
1. Is this good or bad?
$80
2. Are any strategic
policy decisions $60
needed? $40
Without a plan there is $20
nothing to measure $-
performance against. Jan Feb Mar Apr May Jun
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7. ~ WHAT IS DIFFERENT IF THEY HAVE A
PLAN ~
Lets look at the same six month trend chart as a
“Comparative Benchmark Report”.
8. ACTIVITY 1ST HALF YEAR Comparative Revenue Trend
$450
$400
It is easy to
evaluate $350
performance. Sales budget
$300
This information $250
provides places to $200
look for ways to Gross profit budget
improve : $150
$100
1. Mark-up on $50
consultants $-
Net profit budget
maybe too low.
May
Jul
Oct
Jan
Jun
Nov
Dec
Feb
Aug
Sep
Mar
Apr
Revenue Revenue Target Net Oper Revenue
2. Did direct labor
go unbilled? N.O.R. Target Net Profit Net Profit Target
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9. A MID-YEAR ADJUSTMENT IS NEEDED
Increase the mark-up on consultants.
Take steps to improve staff utilization by
applying time more accurately and by filling out
timesheets timely.
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10. ACTIVITY – YEAR Comparative Revenue Trend
END $450
$400
$350
Because of the
mid-year $300
correction, the $250
firm met its
$200
profit goal.
$150
$100
The firm was $50
able to realize
20% more profit $-
May
Feb
Nov
Oct
Jul
Aug
Sep
Jan
Apr
Jun
Mar
Dec
than it would
have without Revenue Revenue Target Net Oper Revenue
the correction. N.O.R. Target Net Profit Net Profit Target
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11. DEVELOPING A PLAN IS TEDIOUS AND
TIME CONSUMING.
But, it will contribute more to the success of your
business than any non-sales related activity.
Small firms can’t afford an in-house cost
accountant to do this work.
That’s why they hire me as their “ad-hoc”
controller. I give them Production Efficiency
Analysis with their Monthly Financial Review that
had only been available to much larger firms
before.
LABRUM ACCOUNTING SERVICE
Joseph Labrum, CDA
LabrumAccntg @gmail.com ~ 206-715-8067
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