Can your business afford to hire more employees? Can you spend more on advertising? Can you afford rent on a larger office space or store front? How will you know?
It all boils down to your books, but financial statements can be difficult to decipher. A professional bookkeeper can help! We employ two methods…
Vertical analysis is when we consider each number on your financial statement as a percentage of something else. When analyzing a balance sheet, every amount is calculated as a percentage of total assets. The income statement can be analyzed similarly by restating every amount as a percentage of sales. By restating expenses as a percentage, we can compare those expenses to one constant variable (in this case, sales). Restated financials can also be compared to financial statements of other companies or industry standards. For example, if we discover through vertical analysis that 3% of your income is spent on renting your store front, we can compare that figure to industry standards.
Benchmarking is the practice by which we compare P&L activity to industry data. DEKE Business Bookkeeping has access to various industry data/standards that can be used as point of comparison. Check out this blog post from 2014 to learn more.
Make Better Financial Decisions for Your Business
The methods outlined above can help you to make better use of your company money! Email David@DEKEbookkeeping.com to schedule a complimentary call.