The Cost of Hiring a Debt Collection Agency
The single most important factor in your getting your money back is to spend your money wisely on selecting the best collection agency. These agencies charge based on a lot of variables and in the end that may determine the price you pay for getting back the money owed to debtors.
Most of the debt collection agencies charge a percentage of the money they will be able to obtain for you for the delinquent accounts you have. This percentage can vary from say 10% and go up to as high as 50%. If these agencies cannot get you your money back then they will not charge you anything at all. But that is not all as these agencies will usually charge a percentage based on several factors relating to your delinquent accounts.
The older the accounts the more percentage they will charge from you as older accounts are very tough to get back money from and hence obviously higher the costs. The trickiest accounts are those which you have been trying to get back money from and were not able to get the money back at all. That means the agency will have to put up more work to wrangle the money back and hence the high cost.
The other costs which are involved in the whole process making long distance call, travel , filing fees or even doing background checks on certain people . All that is a separate cost from the percentage cost mentioned above. Most of the agencies charge these once the job is done but make sure to check the contract for any other hidden charges that may hit you. That is why the due diligence is important before selecting the correct collection agency. You can also make sure to have all costs included in one package and then let the agency charge a percentage fee. That may be easier on you as tracking all the separate costs can easily become a headache if you have a large number of unpaid accounts.
Some agencies may charge you higher fixed fee rather than percentage if you have say for example small amounts to be collected for large number of accounts . In this case the fixed fee is better rather than a percentage as you know what costs are involved and agencies also know what to expect as fees. If you go this route make sure to get some thing into the contract with regards to the success criteria else it may so happen that you do not get any money back but may need to pay the fees.
Amit has worked in the financial industry,primarily working closely with the online debt collection agency and he has experience which he wants to share with others with regards to the online debt collection services.
The Benefits Of A Medical Billing Company
You might be under the false impression that because someone owns a medical practice they are very wealthy. It might be true, but just as easily it might not. If a physician isn’t making the kind of money he should it might be because he doesn’t have the skills necessary to take care of the business side of his business.
A physician who recognizes this weakness will use the services of a medical billing company to take care of the details of his office.
These companies have a trained staff of medical billing professionals who are trained to take care of every billing need a medical practice would have. They can handle the insurance details as well as the medical coding part of the business.
Insurance companies can be very difficult to work with. They will deny a claim for the slightest reason and some of those reasons border on the ridiculous.
A medical practice that is quite busy with patients and chooses to submit their own claims to insurance companies will find that their claims are denied a good deal of the time. If a medical billing company is used, however, this does not happen as often.
A medical practice that sees a great many patients must fill out the insurance claim forms for every one of those patients. One person could be responsible for filling out the forms for every patient that visits the practice. That person must write out the insurance forms and send them off to the insurance company. If one error is made on those insurance forms the claim will be automatically denied. It is then sent back to be corrected and filled out again.
This can often overload the person that is responsible for handling the medical insurance forms.
When the claims are all filled out properly and everything is fine it can still take the insurance company months to send a check. If the practice is relatively small this can wreak havoc on the budget of the small practice. Especially, if there are claims that are denied all in the same time period.
When a medical billing company does the work the practice is relieved of the duty to handle the insurance forms and all of the problems that are associated with it. There are professionals working on the claims and getting them to the insurance company through electronic methods. This eliminates the need to enter the claims manually to the insurance company.
A medical billing company will also make sure that the claim goes through the process error and problem free. They will constantly monitor the claims to make sure that there is no problem. Most of these businesses have a success rate of more than ninety percent.
An electronic submittal of a claim gets either rejected or accepted right away. If it is accepted the check will be sent to the practice in days not months as happens with a manual system.
If the practice is small a business that will get them their checks from the insurance company quickly is the difference between success and failure. If the practice thinks that the cost of a medical billing company is too much for the small business to afford they should consider what is at stake and then analyze the cost.
A medical billing company will work for any type of practice no matter what kind of medicine they practice.
Peter Geisheker is CEO of The Geisheker Group marketing firm. One of the types of clients that Peter helps are medical billing services
Learn Everything About Bookkeeping And Its Function
Bookkeeping is an essential part to the business that you have worked so hard to create. Bookkeeping is a way to merge heaven with earth. It is a way to manifest your dreams in physical form and give them a body/vessel to hold them in. Bookkeeping is based on two basic principles. One is that every debit must have an equal credit.
Bookkeeping is the process in which all valuable financial information is gathered and recorded. Using an outside bookkeeping service may improve your financial records and minimize your expenses at the same time. Bookkeeping is merely recording expenses and income, but what happens from there is key to good books.
Whoever is entering the data needs to understand that. Bookkeeping is a set of practices, physical acts that often feed into accounting. The difference is similar in many ways to the difference between mathematics and arithmetic, and most small people just need to understand basic bookkeeping, the arithmetic and file-folder end of things.
Bookkeeping is the process of maintaining accurate records of daily financial activities of a business. It provides a picture of how your business is doing. Bookkeeping, commonly referred to as keeping the books, is the process of keeping full, accurate, up-to-date business records.
Proper bookkeeping can help businesses effectively manage cash flow , stay abreast of profits and losses, and develop plans for the future based on financial trends. Bookkeeping and Management Systems does not sign checks for you because they are printed in your office. Neither do we make deposits; therefore, you have an added layer of protection.
Bookkeeping stems from the recording of financial transactions and the accounting term for a business accounts as books. In effect the accounting function prepares a record of the monetary affairs of a business and stores the information in files called books.
Bookkeeping and accounting is among the simplest of processes that a company can outsource to a third party. The best part of working with Impaact Bookkeeping is that you not only get to save money, but also become free to focus your attention on other important business aspects.
Accounting not only revealed how the essence of goods lay in their exchangeability but demonstrated just how naturally commodifiable everything was. Accounting software is used by accountants to enter many complex financial transactions and invariably based upon double entry bookkeeping principles.
A major advantage to those companies and the finance staff is the extent to which financial information contained in the database can be queried for financial control purposes.
Bookkeeping is an essential part of any business- small or large. Essentially bookkeeping could be defined as the act of accounting or recording the financial transactions which is done by either that of a business, an organization, or private individual. Bookkeeping is a tedious task for accounting firms as it takes long hours to maintain the accounts. Bookkeeping rates differ from one firm to another depending on the efficiency of the service provider. Bookkeeping is not among these activities.
For an accounting firm, allocating a significant amount of their time to bookkeeping, which can only attract their lower-end fees, is unsatisfactory for the firm and similarly unsatisfactory for their clients whom perceive that they are paying too much to have their accountant complete their books.
Jigfo.com is a global platform for sharing and learning knowledge. For more information on this article topics visit:
http://beijing-2008-cycling.jigfo.com/
http://beijing-2008-equestrian.jigfo.com/
http://beijing-2008-fencing.jigfo.com/
Basic Bookkeeping And Accounting Skills That You Must Have
Book Keeping and Accounting is something foreign to many, maybe because they never cared to learn it thinking it is just a dull game of recording transactions using unnecessarily complicated terms and methods. Far from it, book keeping and accounting is a logical way of recording transactions in a professional manner so that the information could be used in the ascertainment of many other vital business criteria such as the profits or losses made, who owes you and how much; how much you owe others, or are you carrying enough cash in the business for meeting immediate commitments etc., just to name a few.
Accounting is something that is useful in your personal as well as professional lives, and it would be worth your while to shed your prejudices and listen! Accounting is nothing complex as you have mistakenly imagined. It is based on one of the most fundamental concepts that if one receives something, then obviously another has to give; and therefore every transaction has a two-fold aspect called debit and credit in accounting terms. Maybe this reminds you of one of Newton’s Laws that action and reaction are always equal and opposite.
Fundamentally, the study of accounting is built on (i) The Accounting Equation, and (ii) Double Entry Book Keeping.
(i) The Typical Accounting Equation:
Assets = Liabilities + Equity
(ii) Double Entry aspect of Book Keeping:
The perfect balancing of the accounting equation is guaranteed by this system.
I think it pertinent now to define Accounting as a system of summarizing financial transactions and recoding in such a manner as to facilitate using such records for later analysis, preparation of further financial statements, interpretation of accounts and communication as required.
Now let’s go a little further with the Accounting Equation enunciated above, and move on to its practical implications:
Assets are your possessions (including what others owe you) while liabilities are what you owe others. The difference between the two is called Equity, which includes capital introduced by you (if it is a sole proprietorship) or by shareholders (in the case of a limited liability company) plus or minus any retained profits or accumulated losses respectively. May I also just state in passing that capital introduced is not refundable to anybody and as such it is not a liability. Hence it is called Equity.
Say, you buy a Motor Vehicle for $40,000 for which you pay $25,000 out of your retained profits (or personal savings) and for the balance you take a loan of $ 15,000 from an outsider.
Substituting these values in the Accounting Equation, we have:
Assets (Possessions) = Liabilities (what you owe others) + Equity (Capital/Personal Savings)
$ 40,000 = $15,000 + $25,000
You see one debit of $40,000 is equal to two credits added together ($15,000 + $25,000) = totaling to $40,000.
There could be more complex transactions requiring distribution to more ledger accounts as well as transactions involving only two ledger accounts. Every equation comprises of the double entry with one or a series of debits on one side of the equation equaling one or a series of credits on the other side.
In the two examples given below you will see how the two concepts of Accounting Equation and Double Entry are synchronized:
(i) Settlement of a liability by paying cash $50.
The liability represented by a creditor receives while your cash account gives.
Creditor (debited with) $50 = cash account (credited with) $50
(ii) Receipt of a debt from a debtor who owed you $75.
Your cash account receives while the debt represented by a debtor gives
Cash (debited with) $75 = Debtor (credited with) $75
Earlier we sited one of Newton’s laws to illustrate the concept of double entry in book keeping. At this point we would like to take you back to your algebra lessons way back in grade 8 or so where you were told that if you add something on one side of an equation, that you have to do the same to the other side of the equation too? It’s fair enough, is’t it? That is exactly what we ask you to do in book keeping too making the double entry equal and balancing.
Double entry book keeping is nothing so complex or weird as to defy fair and reasonable common sense. You can easily grasp the concept of double entry by training yourself to think logically as to who or what gives, and who or what receives in each transaction; and by framing the entries accordingly, while ensuring that the two sides of the equation are in agreement (balancing) and are consistent with common sense.
This article was written for Find This Online an online resource guide that offers a variety of articles written on different subjects. Visit us at Here for more articles on accounting information.
How Small Medical Practices Can Become Financially Devastated
Many people believe that just because a person owns a medical practice they have a lot of money. In some instances this can be true however, many times a physician can own a medical practice and still have very little money to show for it. This is not because he or she is not a good physician, most often it is because he or she lacks the skills to run the business end of their practice efficiently.
More and more physicians are finding that using a medical billing service actually helps them to run a more efficient office.
A medical billing company has trained professionals that will handle all of the billing needs from coding to submission to the insurance companies.
Many insurance companies today have reputations of being notorious for denying claims that have been submitted for the most ridiculous reasons.
A busy medical practice that submits their claims on their own is more likely to have those claims denied than if a medical billing service was used.
If a medical practice sees fifty patients a day, then fifty medical claim forms must be filled out and submitted. This means that the person who fills out the claims manually must go through the entire process fifty times a day manually and mail it to the insurance company where it will sit in stacks of thousands of other claims waiting to be entered into the insurance company computers. If there is one mistake, the claim will be rejected and sent back to the medical practice to be filled out properly.
This means that the person who fills out the medical claims will have more work than he or she can handle. It can be very frustrating.
Even if the claims are filled out correctly, it can take several weeks to several months to receive a check from the insurance company. For a small medical practice, it can be devastating if several claims are denied at the same time.
A medical billing service takes all of the headaches and frustration away because they handle every aspect of medical billing. Trained professionals code the claims and submit them to the insurance companies electronically, eliminating the process of manually entering them at the insurance company.
Another benefit is that a medical billing company offers is that they will follow the claim from beginning to end, making sure that there are no problems. They also have an excellent acceptance rate of over ninety percent.
When a claim is submitted electronically, it is either accepted or rejected immediately. When it is accepted, a reimbursement check is sent out within days and not weeks or months.
For small medical practices that rely on the insurance reimbursement checks to operate their business, a medical billing company is a godsend. Many think that the cost of a medical billing company is more than they can pay; however when you look at what you could lose, the cost is really quite reasonable.
Medical billing companies are available to everyone in the medical industry no matter what their specialty is.
Peter Geisheker is CEO of The Geisheker Group marketing firm. One of the types of clients that Peter helps are medical billing services
Learn Something About Accounting And Its School
Accounting is the study of measuring, analyzing and interpreting financial activity by providing assurance of financial information, as well as compiling and preparing financial records. Managers, tax authorities and investors within organizations, companies and public agencies, such as the government, use this information to allocate resources.
Accounting electives are typically taken as directed studies, that is, taken by an individual student under the tutelage of an Accounting Area faculty member. Such electives focus on a specialized area of interest to the student and the faculty member, and can be helpful in filling in gaps in your knowledge in preparation for doctoral research. Accounting refers to the tracking of the consumption of NAS resources by users.
This information may be used for management, planning, billing, or other purposes. Accounting seeks to measure the results of an organization’s economic activities and convey this information to management, investors, creditors, regulatory agencies, consumers, and employees.
Under this broad definition, the field includes such distinct areas as auditing, management accounting, financial accounting, international accounting, tax accounting, and public-sector accounting.
Accounting topics of current concern to faculty and students. Offered only when faculty are available and sufficient student interest exists. Accounting activities may occur within or outside the organization.
Although accounting is usually identified with privately owned, profit-seeking entities, its services also are provided to not-for-profit organizations such as universities or hospitals, to governmental organizations, and to other types of units. Accounting majors have gone on to become business owners, investment bankers, loan officers, actuaries, economists, tax specialsists, and so much more.
Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such.
Accounting majors need only to complete the application for scholarships available through the Department or the Deans office in order to be considered for all scholarships available in any given year. Accounting is the language of business, encompassing all phases of business operations as well as specialized accounting knowledge. Accounting is oriented to both preparers and users of financial information.
Accounting faculty members at a school of business are actively engaged in various research projects related to economic and risk management aspects of information assurance.
From the teaching perspective, information assurance is now an integral part of most accounting courses at the Smith School, including such courses as: auditing, managerial accounting, ethics and professionalism in accounting, business ethics, accounting systems, financial statement analysis, taxes, international accounting, and financial planning and control systems for managers and consultants.
Accounting Clerk positions require applicants to have basic accounting knowledge and typically some computer training. The courses offered at West Valley College include a computer component designed to give the students working knowledge of the way accounting is done in today’s technological environment. Accounting clerks post transactions in journals and on computer files and update the files when needed. Senior clerks also review computer printouts against regularly maintained journals and make necessary corrections.
Jigfo.com is a global platform for sharing and learning knowledge. For more information on this article topics visit:
http://www.jigfo.com
http://animal-testing.jigfo.com/
http://isreal-and-hamas-truce.jigfo.com/
How Medical Practices Can Increase Their Insurance Claims Acceptance Rate
Throughout the country, busy medical practices are turning more and more toward medical billing companies because of the level of service they provide.
Any type of medical practice can use medical billing. It is a cost effective way to run the business end of your medical practice.
Small medical practices often take on the task of medical billing in order to cut corners and to save money. This can be devastating to the financial stability of the medical practice especially if it relies on the repayment from insurance companies to meet its financial obligations.
When medical personnel manually fill out the paperwork for billing, it can take long tedious hours just to make sure it is done correctly.
It is mailed to the insurance company where it is sorted in the mail room and then makes it way to the desk of the claims department where it sits in stack of medical claims waiting to be processed.
You are not guaranteed a speedy turnaround time and often it can take several months to see your return. If by chance there is a mistake on your claim, it is rejected and you have to start the process all over again.
It can be quite maddening to have to wait for a return that is not coming, and tracking a payment can be as frustrating as the rejection itself.
This is why medical billing is so critical to any medical practice. It takes all of the frustration out of the billing process because the highly trained professionals do all of the work for you.
As with any business, medical billing companies charge a fee for each claim that they process. Many people feel that the fee is not worth paying, however, when you stop and think about the service that you are paying for, you may find that it is worth the cost.
Medical billing companies provide a level of service that is second to none. The medical billing specialist code and send your medical claims electronically to insurance companies.
What this means is that the claim is sent directly to the insurance company computers where it is accepted or reject immediately and the billing service is notified within minutes. Once the claim is accepted, your payment is sent within days instead of weeks or months.
Medical billing companies also track each claim from the time it is submitted to the time you receive your check. This means that you have more time to spend with your patients without having to worry about anything else, and your office staff can devote more time to the duties of running your office.
This is what medical billing services offer their clients. An added benefit to using a medical billing company is that their acceptance rate of claims is over ninety percent meaning that the rejection rate is less than ten percent.
It just makes sense to use a medical billing company because of the advantages. The fast turnaround time is well worth the cost of the service.
Peter Geisheker is CEO of The Geisheker Group marketing firm. One of the types of
clients that Peter helps are medical billing service
Enterprise Risk Management: No Company Is Spared
“Just when you thought Sarbanes Oxley concerns had been sufficiently addressed so that non-public companies could take the issue off their dashboard, things have changed, ” says Gary W. Patterson, Enterprise Risk Management expert and speaker. He forewarns that Enterprise Risk Management (also referred to as ERM) will soon become a business issue for almost every business on the planet, including family-owned businesses, private companies, and nonprofits. This is a strategy shift for many of these organizations, which up until this point thought Sarbanes Oxley (sometimes affectionately known as Sarbox) applied only to public companies, and big ones at that.
One major reason for this sea change in philosophy is that both Standard & Poor and Moody are soliciting comments on their approach to ERM analysis and how they plan to factor it into their ratings. Their discussions will accelerate activity under way where bankers, governmental organizations, and regulators, in particular, have been considering the need for stronger corporate governance. For them Sarbox is an easily obtainable platform to use for drafting programs they believe should exist in corporations directly or indirectly under their jurisdiction. Lest you have any doubts, note how user friendly definitions from Wikipedia describe this trend.
“In business, enterprise risk management (ERM) includes the methods and processes used by organizations to manage risks (or seize opportunities) related to the achievement of their objectives. ERM provides a framework for risk management, which typically involves identifying particular events or circumstances relevant to the organization’s objectives (risks and opportunities), assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring progress. ERM can also be described as a risk-based approach to managing an enterprise, integrating concepts of strategic planning, operations management, and internal control. ERM is evolving to address the needs of various stakeholders, who want to understand the broad spectrum of risks facing complex organizations to ensure they are appropriately managed. Regulators and debt rating agencies have increased their scrutiny on the risk management processes of companies.” per wikipedia.
Exactly when ERM programs will be implemented is a tougher question. Understandably, non-public companies have a range of reasons for preferring to delay the time when ERM factors will apply to them. However, the question is WHEN - not IF - some form of Enterprise Risk Management requirements will be applied. Family-owned business, other forms of private companies, and non-profits have been forewarned in a number of publications, speeches, and white papers over the last two years.
Some will say that we are drowning in white papers on ERM, corporate governance, Board of Directors, and risk analysis available and dismiss the issue. But those who are proactive, not reactive, will find the time well spent if they begin some level of enterprise risk management dialogue before something critical happens and your company is being second guessed by the ratings agencies, your auditors, or worse yet, a trial attorney.
The topic most companies neglect at their peril is the impact of a fast-approaching clean-energy-influenced economy. Here, we must reassess how much sooner we need to think about a renewable energy world as it relates to areas of your business that will be impacted both positively and negatively, and how that will change your company’s current and long range business plans, including the magnitude of those changes. After all, most C-level executives and their top management teams that I know do not like being second guessed and blind sided.
Gary W. Patterson has helped companies improve their profitability, reengineer their business models, and strengthen or gain competitive advantage in the marketplace. You can reach Gary at www.FiscalDoctor.com or take the free Fiscal Test at http://fiscaldoctor.com/fiscaltest.html.
Cost Accounting For Profit With Accounting Software
Cost accounting is a complex subject that specialist accountants use to examine and report on business expenses to ensure financial control. Such expert cost accounting might involve absorption costing, marginal costing, break even and variance analysis. Such specialist accounting techniques are not usually available to the small business as they lack a cost accountant.
The good news for small business is that the majority do not need such specialist costing analysis as then proprietor usually has intimate detailed knowledge of all business expenses incurred. Or at least the small business believes he has that knowledge.
In truth it is not until regular bookkeeping records are produced that the small business can stand back and examine the real effect of the business expenses on the profitability of the business. And by virtually taking a third party view of the costs and effect of those expenses on profitability can the financial decision be taken to improve profitability.
Producing accounts on a monthly basis using accounting software suitable for the size and accounting experience of the small business owner is the first step to improving profitability. The second step is to review those accounts and determine just which cost items can be changed.
Costs occur and behave in different ways. Some business expenses may be regarded as fixed costs which others are termed variable or semi variable costs. The impact of sales volume increases or decreases variable costs and the marginal gross profit produced while turnover has little impact on fixed costs in the short and medium timescales.
Having produced a monthly profit and loss account and started the accounting for profit review of the financial figures it is useful to separate the nature of the expenses into those that are fixed and those expenses which are variable costs and those expenses which are semi variable costs.
Fixed costs means the level of expenditure does not vary with normal changes in sales volume in the short and medium term at least. But being fixed does not mean the rice of that expense cannot be reduced by examining both the value for money obtained and whether that cost is necessary in the first place.
Fixed costs of a small business might include such items as rent and premises costs, insurance and indemnity premiums, capital costs of fixed assets, administrative, legal and professional fees. Another way to view what is and what is not a fixed cost is to determine which costs are incurred to provide the base operating facility of the business.
If by changing the base of the business or negotiating better rates for those base expenses the fixed costs can be lowered then the pressure on generating gross profit is reduced. Fixed expenses may also contain such waste expenditure and any non essential expenditure in this area should be reviewed for potential elimination on the basis that if it can be dispensed with without affecting sales volume then chop out that expense as waste.
Variable costs depend heavily on the products or services being provided but are essential the cost of goods and services being sold. Often called direct costs the variable costs of a business should be reviewed for ways to reduce the unit cost either by sourcing cheaper supplies at the same quality levels or negotiating more effective prices. The volume of purchases can obviously affect the variable cost and consideration may be given to placing regular orders, higher volume orders or negotiating settlement discounts.
Direct costs are perhaps one of the one most influential cost areas in that the lower the direct cost that can be achieved reduces the sales volume required to reach and exceed the beak even point and also puts less pressure on the fixed costs.
Semi variable expenses would be those items which the small business makes definite decisions to buy depending upon the requirements of the products and the level of volume required. Many semi variable costs are dependent upon the management decisions of the small business owner and are a critical area in which the success or failure of the business may depend.
Semi variable costs may include the advertising and promotion costs of the business, perhaps the transport and distribution costs, direct employees and goods or services bought in to support the sales volume.
Each variable cost should be reviewed and a decision made on whether value for money is being obtained. That review should also examine whether the level of support the semi variable costs provide to the achievement of financial success is adequate, improvable or could be dispensed with.
Accounting for profit is the key area in which to examine all costs. Accounting or bookkeeping software can be a useful tool to identify the volume and levels of expense. The nature and performance of each expenditure classification should be subjected to the critical review of the small business owner to generate either a higher or safer financial performance.
Terry Cartwright of DIY Accounting designs Accounting software on excel spreadsheets providing complete Small Business Accounting Software solutions for with single and double entry Bookkeeping solutions for limited companies and self employed business
Sales Accounting For Profit With Accounting Software
It is a natural phenomenon for small business to be deeply involved in the particular skills and operations of the business. A fundamental issue that many small businesses overlook is that the particular industry in which they work and their personal skills are just tools of the trade not the trade of business itself. That trade of business is to produce a satisfactory bottom line.
While all business keeps financial records and many use accounting software the serious benefits of producing the accounts has a tendency to be restricted to accounting for tax purposes. The most useful function of a good bookkeeping system is however to use the financial information to generate higher levels of profitability.
The first step is to acquire and adopt an accounting software package suitable for the skills and knowledge of the small business. The second essential step is to produce a regular monthly income and expenses statement, usually called a profit and loss account.
Any individual monthly profit and loss account is of useful by limited value as a financial tool. Several consecutive monthly financial accounts can be indicative of where action can be taken to use the bookkeeping tool as a tool for accounting for profit.
Having produced a set of monthly accounts the next stage is to simply sit back and look at the numbers. The financial numbers tell the story of how the business has performed financially and with an intimate knowledge of how the figures came about the small business owner is perfectly placed to consider all potential options.
Sales turnover is a critical area to be considered. The historical sales income should be viewed in three separate modes being sales volume, sales prices and marginal profitability, the most critical and important of which is likely to be marginal profitability.
It is useful to stand back from the numbers and consider how the sales volume was achieved, what the driving forces where to achieve that level and what additional promotion can be done to increase sales volume even higher. Thinking about how the sales volume was obtained is the basis for determining how even higher levels can be produced in succeeding months.
Selling prices are often driven by market forces and product costs. An important area to consider is whether the sales prices obtained where the maximum prices obtainable at the same volume. Other considerations would be to consider the effect of increasing sales prices which would increase profitability if the same volume is maintained and even the effect of reducing sales prices if the volume of business increases to produce a higher level of gross profit.
Businesses in niche markets can charge a high selling price for the products or services without affecting the demand for the goods. On the other side of the coin the supermarket approach could be adopted by generating high volumes of sales from promoting the products at the lowest available prices.
The most critical area to be considered is the marginal profit from different products or services. The marginal profit is the gross profit which is the difference between the net selling price and the variable cost of that business area.
A lot of time can be spent working in the wrong direction, By identifying the most profitable items compared with the time and effort involved the small business can become more financially efficient by diverting more effort to those areas producing the highest financial returns.
The essential tool to this study is to maintain accounting records on a regular basis and produce a monthly profit and loss account. Periodically take a step back and consider the direction, future and opportunities available based on historical performance and the changes required to positively influence the bottom line, using and viewing the accounting software as a business tool. That tool is accounting for profit.
Terry Cartwright, CEO DIY Accounting, a qualified accountant in the UK, designs Accounting Software on excel spreadsheets and Payroll Software for small to medium sized business providing a complete accounting solution and also supplies Company Formation packages for new limited liability companies
