In every micro business, entrepreneurs will learn the sometimes harsh lesson, you have to spend money to make money. The success of your endeavors doesn’t just rely on your profit to loss margin, but your sales to cost margin as well. Yes, the two are linked together financially, but you must realize that one is large scale and the other is micro scale. You could make a profit for one month but in that same month you decided to purchase stock of another business to invest elsewhere. That would mean, you would incur a smaller profit or even break even. Sales and costs refers to product inventory. How much did you pay to have your products made and how much did you make from selling them? This is the meat and potatoes of any business. Here’s how you can keep track of what you’re doing.
Sales per product
A wider overview of your sales is of course the norm and should be the standard for quarterly reporting. However it’s best to get down to the nitty gritty and figure out what kinds of products were sold with a sales per product report. If you have more than one product, you’ll want to know how each product performed against one another but also regarding tactical pricing. This can also help you understand consumer trends as there will always be a reason why certain products outsold others. You can then figure out how much money you have made per the cost of each product sold with regards to retail performance. If you would have needed 60 products to be sold of a certain type to break even from the costs of producing it, but only sold 50, you would be at a net loss. However with strategic pricing, those 50 might have been sold at higher than expected price thus hitting your target.
Faster at the terminal
The terminal stage of the purchase for consumers is of course the exchange of currency for the product or service. This can be easily tracked using something like a credit card terminal which automatically logs all the purchases made on it into your system. If you have an online business it goes straight to your business account along with several firewall checks being done first. Not only does it speed things up for you but the consumer isn’t left around waiting too long at the cashier’s station. Cashiers are human, they make mistakes and sometimes they can end up giving too much change to a customer. This could mean just a few pennies or a lot more. Maybe it’s fatigue or not paying attention, either way a card terminal takes this possibility out of the equation.
Cash flow matters
Making a cash flow report could also help you to track sales and costs. For example, where is the money going that you make? It is being invested into future projects, is it going to pay a B2B client for their services? You’ll be better able to tell how many sales you need to make so you can fund other projects in your business this way.
Profits and losses all rest on your sales and costs. By creating a sales per product report, you can pinpoint where you’re going wrong and what products are the most successful.
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