The best internal control tool to maximize profit in construction is an estimate. Estimates act similar to a dashboard of critical information necessary to evaluate overall performance. In insolation, they serve the purpose of determining the minimum core price to charge the customer in order to deliver enough contribution margin to offset that project’s share of indirect and overhead costs. Any value in excess of this core price adds to the company’s bottom line. If properly set up, administered, monitored and evaluated upon completion; estimates are a critical element of the accounting feedback loop. This one internal control tool delivers more value to owners and management in construction than any other control device.
The income statement is the proper name for one of the five main financial reports customarily prepared by accountants. It is usually the primary statement and is often referred to as the Profit and Loss Statement. The income statement presents the total revenue generated and the associated costs/expenses and the resulting net profit earned by the business during an accounting cycle.
An owner of a hair salon needs a well organized and properly formatted profit and loss statement (income statement) to properly evaluate performance. There are multiple presentation formats used in the service industry, but after 25 years of accounting I advocate for the functional presentation arrangement. This form of a profit and loss statement allows the owner to quickly and decisively determine performance throughout the entire operation.
Class accounting breaks down sales and the associated cost of sales into functional groups. Whether you use divisions or departments or product/service lines class accounting allows you to identify those more profitable areas of operations. This is just one of the many different financial reports used in small business.
Financial statements serve the purpose of presenting economic activity and status related to a particular date and over a particular time frame. Accountants record monetary transactions and via financial reports present the information in an easy to understand format. The financial statements for a small business do not have to comply with those of publicly traded operations.
In the apartment complex industry I have had the privilege of reviewing four different presentation formats prepared by different Certified Public Accounting Firms. Interestingly enough, they were all distinctly different. But one stood out! It made much more sense than the others. One of the other three had an interesting subsection and so I combined the best attributes of both.
A well organized and understandable restaurant profit and loss statement can provide infinite value to a restaurant owner. The best format to use allows the owner to understand his prime costs, total variable costs and the required contribution number necessary to cover fixed costs and desired profit.
Accounting refers to the business function of recording economic activity. Accounting includes the processing of information and a reporting role. The accounting term encompasses a broad range of functions for every business. It starts out with a system of gathering economic information, categorizing the material, inputting the data into an accounting program, and generating outputs for decision making.