unlock hidden profits from your quickbooks
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TRANSCRIPT
Presented By Steve LeFever
Business Resource ServicesSeattle, Washington
Unlock Hidden Profits from Your QuickBooks
QuickBooks Webinar Wednesday, September 3, 2008
Measure
What Gets MeasuredGets Managed
Measure
1. Plan properly
2. Monitor financial position
3. Understand the relationship between price, volume, and costs
4. Manage cash flow
5. Manage growth
6. Borrow properly
7. Plan for transition
Seven Steps to Profit Mastery
Assets = Liabilities + Net Worth
QuickBooks
Balance Sheet
The Financial Operating Cycle
Assets = Liabilities + Net WorthSales
QuickBooks
Balance Sheet
QuickBooks
Income Statement
The Financial Operating Cycle
Net Profit
Assets = Liabilities + Net WorthSales
QuickBooks
Balance Sheet
Uses of Profits:
QuickBooks
Income Statement
The Financial Operating Cycle
1. To pay for new assets2. To pay off debt3. To pay out to the owners
Net Profit
Assets = Liabilities + Net WorthSales
QuickBooks
Balance Sheet
Uses of Profits:
Efficiency
QuickBooks
Income Statement
The Financial Operating Cycle
1. To pay for new assets2. To pay off debt3. To pay out to the owners
Net Profit
Cascade Office Systems
Step 1. Gather accurate and timely financial information.
Action Steps
Step 4. Record your industry composites (if available).
Step 2. Package the information to see relationships.
Step 3. Calculate financial ratios.
Step 5. Compare your results. Step 6. Analyze the possible causes of problems.
Step 7. Take action — formulate and implement a plan, and monitor results.
Cascade Office Systems Ratio Analysis Spreadsheet
2005
2006
2007 Industry Composite
Calculations, Trends, or
Observations
BALANCE SHEET RATIOS: Stability (or “Staying Power”)
1. Current Current Assets
Current Liabilities 1.7 1.1 0.99 1.8 726,100
734,400
2. Quick Cash + Accts. Rec.
Current Liabilities 0.8 0.5 0.38 0.8 282,300
734,400
3. Debt-to-Worth Total Liabilities
Net Worth 1.5 1.4 2.68 1.2 823,700
307,300 INCOME STATEMENT RATIOS: Profitability (or “Earning Power”)
4. Gross Margin Gross Profit
Sales 21% 20% 18.5% 22.2% 400,000
2,160,000
5. Net Margin Net Profit Before Tax
Sales 3.5% 3.0% 0.29% 3.2% 6,300
2,160,000 ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios
6. Sales-to-Assets Sales
Total Assets 2.3 2.3 1.9 2.4 2,160,000
1,131,000
7. Return on Assets Net Profit Before Tax
Total Assets 8.2% 6.9% 0.56% 6.9% 6,300
1,131,000
8. Return on Investment
Net Profit Before Tax
Net Worth 20.9% 16.5% 2.0% 15.8% 6,300
307,300 ASSET MANAGEMENT RATIOS: Working Capital Cycle Ratios
9. Inventory Turnover
Cost of Goods Sold
Inventory 5.6 8.1 4.2 4.9 1,760,000
419,000
10. Inventory Turn-Days
360
Inventory Turnover 64 44 86 74 360
4.2
11. Accounts Receivable
Turnover Sales
Accounts Receivable 8.9 10 8 8.5 2,160,000
270,000
12. Accounts Receivable Turn-Days
360
Accts. Rec. Turnover 40 36 45 43 360
8
13. Accounts Payable Turnover
Cost of Goods Sold
Accounts Payable 12 10.4 5.7 9.8 1,760,000
310,100
14. Average Payment Period
360
Accts. Pay. Turnover 30 34 63 37 360
5.7
BALANCE SHEET RATIOS: Stability (or “Staying Power”)
05 06 07 Industry
1. Current Current Assets 1.7 1.1 0.99 1.8 726,100Current Liabilities 734,400
2. Quick Cash + Accts. Rec. 0.8 0.5 0.38 0.8 282,300 Current Liabilities 734,400
3. Debt-to-Worth Total Liabilities 1.5 1.4 2.68 1.2 823,700Net Worth 307,300
Profit Mastery Scorecard
For every $1 of (bottom #), there is $X of (top #)
INCOME STATEMENT RATIOS: Profitability (or “Earning Power”)
’05 ’06 ’07 Industry
4. Gross Margin Gross Profit 21% 20% 18.5% 22.2% 400,000Sales 2,160,000
5. Net Margin Net Profit Before Tax 3.5% 3.0% .29% 3.82% 6,300 Sales 2,160,000
Profit Mastery Scorecard
For every $1 of (bottom #), there is $X of (top #)
ASSET MANAGEMENT RATIOS: Overall Efficiency Ratios
’05 ’06 ’07 Industry
6. Sales-to-Assets Sales 2.3 2.3 1.9 2.4 2,160,100Total Assets 1,131,000
7.Return on Assets Net Profit Before Tax 8.2% 6.9% 0.56% 6.9% 6,300 Total Assets 1,131,000
8. Return on Net Profit Before Tax 20.9% 16.5% 2.0% 15.8% 6,300 Investment Net Worth 307,300
Profit Mastery Scorecard
For every $1 of (bottom #), there is $X of (top #)
Profit Mastery ScorecardASSET MANAGEMENT RATIOS: Working Capital Cycle Ratios
’05 ’06 ’07 Industry
9. Inventory Cost of Goods Sold 5.6 8.1 4.2 4.9 1,760,000Turnover Inventory 419,000
10. Inventory 360 64 44 86 74 360Turn-Days Inventory Turnover 4.2
11. Accounts Receivable Sales 8.9 10 8 8.5 2,160,000Turnover Accounts Receivable 270,000
12. Accounts Receivable 360 40 36 45 43 360Turn-Days Accts. Rec. Turnover 8
13. Accounts Payable Cost of Goods Sold 12 10.4 5.7 9.8 1,760,000Turnover Accounts Payable 310,100
14. Average Payment 360 30 34 63 37 360Period Accts. Pay. Turnover 5.7
Low Gross MarginWhat’s their Low Gross Margin costing?
Their Margin in 2007: 18.5%
Their Peers’ Margin: 22.2%
Difference +/- 4%
Sales in 2007: $2,000,000
X margin difference: X .04
Margin $ Left on the Table: $80,000
Primary Impact: Profit
Industry achieves 4.9 turns Their COGS was $1,760,000
COGS
Target Inv. Turns
$1,760,000
4.9= $359,000
-Targeted Inventory $359,000
Actual Inventory $419,000
How much too much? $60,000
=
1 Day = $60,000/12 days = $5,000 Cash
Too Much Inventory
Primary Impact: Cash
1. Plan properly
2. Monitor financial position
3. Understand the relationship between price, volume, and costs
4. Manage cash flow
5. Manage growth
6. Borrow properly
7. Plan for transition
Seven Steps to Profit Mastery
