SMALL BUSINESS FINANCE 3: INCOME STATEMENT
The Balance Sheet is a snapshot of how your business stands at a point in time. The Income Statement shows how / why / by how much your business is growing.
REVENUES. If you have somebody selling for your business, you have to take out from the Sales figure his compensation. Then, you have to deduct the Cost of the Goods you have sold. What is left is what you have to pay for the Expenses of your business.
MANPOWER COSTS. Into this account go the business expenses for employees who do work other than the production of goods to sell (e.g., secretary, driver, messenger, etc). The expenses for employees who are involved in the production of goods are included in the Cost of Goods Sold.
It is a good idea to itemize Manpower Costs into: Base Pay, Overtime Pay, Social Security, Employee Benefits, Training. Especially with regard to Overtime Pay, the identification of the particular expense can give you early warning signals on efficiency & effectiveness. If you are paying too much overtime, you may not have enough staff or employees are spending too much time in coffee or personal breaks.
OCCUPANCY COSTS & OTHER OPERATING EXPENSES. I have tried to include a complete listing of expenses. Of course, some of the items may not apply to your business. The listing serves as a reminder of what to include.
% OF SALES. I have included a column to show how each item of expense relates to sales. Using Sales as the denominator, you can note at a glance what part of your revenues is going where. This column should help you control your expenses.
