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Profit & Expense Control

1. to establish a set of financial records that will enable management to institute profit and expense control procedures,
   
2. to assist management in gaining control of expenses and planning for profit, to establish levels of income, cost, expenses, and a pre-determined operating profit and enable you to develop future annual budgets,
   
3. to provide a comprehensive management control relating cost, expense and profit objectives to various levels of income (this will enable management to identify the company’s break-even point),
   
4. to provide management with a tool so that variances from expected budgetary performance may be understood and corrective actions taken and to ensure that all direct costs and expenses are accounted for and
   
5. to further ensure that correct percentages are applied for the allocation of overhead and for profit.
6. To provide management with weekly overviews of income, cost and expenses
   

• Revision to the present Chart of Accounts
  
• Developing a Profit Goal and Expense Control Procedure
• Developing a Fiscal Budget
  
• Establishing a schedule of operating standards for levels of income
  
• Design and Install an Variance Procedure
• Revising the present method of Job Estimating and Pricing
  
• Developing a Weekly/Monthly/Quarterly and Annual Operations Reports
• Establishing New Standards to periodically calculate
  
• Overhead Burden Ratios and
  
• Labor Burden & Productivity Rates
• Designing all Forms and writing Standard Procedures
  

An annual sales and income forecast supported by operating budgets is one of the first steps towards creating the benchmarks used to measure team and individual performances. The following may best explain the primary reasons for developing an annual plan:

• The components of the forecast are new orders, sales, direct cost of sales, indirect cost of sales, gross margin (gross profit) contribution, overhead expenses, and net profits before taxes. Knowing these components enables management to calculate the true cost of doing business.
• The break-even point for each estimate is easily calculated. Once you know your costs and estimate jobs based on direct and indirect costs, you'll be in a better position to negotiate the final price and will know when the desired price is too low.
  
• With an annual forecast in place, you can perform several "what if" scenarios and see what the impact is on your bottom line. You can actually forecast your net profits at the end of the year at any point during the fiscal year. You don't have to wait until year-end.
  
• An annual forecast establishes goals for the company. Management becomes more goal-oriented.
  
• An effective annual forecast is more than an annual sales target. That annual target is broken down by quarters and then by months based on the seasonality of your business to create a pathway to reaching that annual goal.
  
• An annual plan supported by a sales forecast and operating budgets to arrive at an anticipated net profit figure is a process that creates a proactive decision making environment. Management is more likely to direct and control the business instead of just letting it happen. This proactive environment helps minimize the impact of factors over which you thought you had no control in the past.