CompTIA P&L Management with Frank Coker
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Frank Coker offers an overview of managing your P&L
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CompTIA P&L Management with Frank Coker
- 1. Quick Start to P&L Management Presented by: Frank Coker CompTIA Faculty CEO, CoreConnex
- 2. CompTIA Channel Training About this Education The content and materials featured in this presentation are the result of a collaborative, CompTIA community-led development effort. An advisory group comprised of channel leaders and technical experts identified training goals and objectives, while education specialists carried out development work based on the insights and information provided by the advisory group and other subject matter experts. About CompTIA CompTIA is the voice of the world's information technology industry. As a non- profit trade association advancing the global interests of IT professionals and companies, we focus our programs on four main areas: education, certification, advocacy and philanthropy.
- 3. Why Manage Your P&L? • Improve Cash Flow • Know Where to Invest and How to Grow your Business • Make Incremental Improvements • Identify Problems • Increase Business Value • Know where you stand in comparison to peers • Provide company leadership
- 4. Context Accounting System P&L (Income Statement) Balance Sheet Analytical Tools (Dashboard) Operations Systems and Tools
- 5. P&L Anatomy Sales (revenue) Minus COGS (cost of goods sold) Equals Gross Profit (gross margin) Minus Expenses (SG&A / overhead) Equals Net Profit (profit)
- 6. Steps to Successful P&L Management You can’t manage unless you measure! Managing a P&L requires: 1. Accounting data collected be organized and collected at right level of detail for analysis 2. Metrics from the data be summarized and compared appropriately (“dashboard”) 3. Analysis happens periodically and routinely 4. Management action is taken based on analysis
- 7. What Is The Ideal? Healthy P&L revenue increasing faster than expenses Unhealthy P&L expenses increasing faster than revenue Required: must monitor monthly trends
- 8. The Ticking Time Bomb Hidden Problem: If margins do not grow as fast or faster than revenue (same as saying COGS growing slower than revenue), new business is probably damaging the bottom line and may mean company is not scalable. (good) (good) (bad) (bad)
- 9. Chart of Accounts – The Road Map • Chart must be at right level of detail – Most frequent mistake is for the Chart to be too general… • Don’t leave design to someone who doesn’t know your business! • Design, implement and then adjust over time Chart of Accounts Account # Account Description Revenue Product Sales 4101 PC's, Laptops, Tablets, etc 4102 Servers 4103 Printers 4104 Telecommunications Equipment 4105 Cabling 4106 Packaged Software Orig. Licenses 4107 Packaged Software Renewals/Maint. 4108 Misc. Product Sales Time & Material Services 4201 T&M Services - Installation Svcs 4202 T&M Services - Repair/Maintenace 4203 T&M Services - Software Consult
- 10. Key Metrics - Gross Margin • Why is Gross Margin Important? – GM = Revenue – Costs – GM% = GM / Revenue • What are Lines of Business? Revenue Product Sales T&M Service Project Services Managed Services Total Revenue Cost of Sales Product Sales T&M Service Project Services Managed Services Total Cost of Sales Gross Margin Product Sales Margin T&M Service Margin Project Services Margin Managed Services Margin Total Gross Margin Gross Margin % Product Sales Margin % T&M Service Margin % Project Services Margin % Managed Services Margin % Total Gross Margin %
- 11. Chart of Accounts -- Defining Lines of Business • Line of Business (LOB) – Different economics – Different business activities • Record your Revenues AND Costs by LOB • Consider using Industry Templates: – Service Leadership Inc. – Corelytics by CoreConnex Standard Lines of Business 1. Product Sales (Resale of Hardware/Software) 2. Managed Services 3. Project Services 4. T&M Services 5. Other
- 12. Ensuring Meaningful Gross Margin Metrics • Revenue Data Collection – – Break down invoice line items by LOB – Make sure bookkeeper/accountant records receipts by LOB • Cost Data Collection – Attribute costs as closely as possible to LOB – Product and Material costs should be separated by LOB – Separate out operational expenses by LOB as much as possible • Record/allocate Salaries / billable and unbillable time to LOB • Record/allocate benefits/payroll taxes • Office, Training, Office equipment/laptops, etc., and Travel expenses • Don’t allocate overheads (SG&A) accounts
- 13. SG&A and SG&A Metrics • Selling, General and Administrative (SG&A) Expenses are costs not attributable to a LOB – Sales Expenses (not direct to LOB - indirect) – admin salaries, benefits, office/technology equipment – Marketing Expenses (indirect) – same as sales expenses – Executive Salaries/expenses – Rent, utilities – Corporate Expenses, e.g., taxes, business licenses, insurance, legal, accounting, HR, internal info systems, etc. • SG&A Key Metric –Line Item as a Pct of Revenue – E.g., Rent % Revenue = Rent / Total Revenue
- 14. SG&A Expenses % of Revenue Expense $ % of Revenue 6200 Sales Expenses (Indirect) $354,109 8.9% 6300 Marketing Expenses (Indirect) $108,876 2.7% 6400 Executive Salaries and Benefits $169,321 4.2% 6501 Rent $83,209 2.1% 6502 Utilities $4,808 0.1% 6600 Insurance $2,543 0.1% 6800 Legal Fees $5,584 0.1% Total SG&A $728,450 18.3% Compare yours to industry averages (see Corelytics)
- 15. Getting to the Key Metrics • Foundation is the Chart of Accounts • Simple, but Key, First Level Metrics – Gross Margin by LOB/ Business Model – Gross Margin % – SG&A Line Items % of Revenue • Simple Metrics tell you where you are now
- 16. Are You Improving? • Comparison to Prior Months, Quarters, YTD • Margins and SG&A • Caution: Seasonality • Historical Data • Compare – whole dollar amounts – growth – percentages – relational improvement or efficiency improvement This Yr Last Yr Variance Var % Revenue Product Sales $900 $850 $50 5.9% T&M Service 120 140 (20) (14.3%) Total Revenue $1020 $990 $30 2.9% Cost Product Sales $800 $730 ($70) (9.6%) T&M Service $80 $100 $20 20% Total Cost of Sales $880 $850 ($50) (3.5%) Gross Margin Product Sales Margin $100 $120 ($20) (16.7%) T&M Service Margin $40 $40 $0 0% Total Gross Margin $140 $160 ($20) (12.5%) Gross Margin % Product Sales Margin % 11.1% 14.1% (3.0%) (21.3%) T&M Service Margin % 33.3% 28.6% 4.7% 16.4% Total Gross Margin % 13.7% 16.2% (2.5%) (15.4%) SG&A Sales Expenses $30 $25 ($5) (20.0%) Marketing Expenses $35 $45 $10 22.2% Total SG&A $65 $70 $5 7.1%
- 17. Are You Meeting Your Goals? • Goal may be “Budget” or “Forecast” • Goal Comparison to Months, Quarters, YTD • Margins and SG&A • Same Caution re. Seasonality • Compare – whole dollar amounts – percentages This Yr Goal Variance Var % Revenue Product Sales $900 $925 ($25) (2.7%) T&M Service 120 110 $10 9.1% Total Revenue $1020 $1035 ($15) (1.4%) Cost Product Sales $800 $780 ($20) (2.6%) T&M Service $80 $90 $10 11.1% Total Cost of Sales $880 $870 ($10) (1.1%) Gross Margin Product Sales Margin $100 $145 ($45) (31.0%) T&M Service Margin $40 $20 $20 100% Total Gross Margin $140 $165 ($25) (15.5%) Gross Margin % Product Sales Margin % 11.1% 15.7% (4.6%) (29.3%) T&M Service Margin % 33.3% 18.2% 15.1% 83.0% Total Gross Margin % 13.7% 15.9% (2.2%) (13.8%) SG&A Sales Expenses $30 $25 ($5) (20.0%) Marketing Expenses $35 $38 $3 7.9% Total SG&A $65 $63 ($2) (3.2%)
- 18. ALERT!! Do NOT increase revenues when: • Expenses are growing faster than revenue, OR • GM is growing slower than revenue, OR • Cash is falling as revenue increases You generally cannot grow your way out of unhealthy ratios. Companies that try this fail in large numbers. First you must fix costs or pricing problems and then move forward with growth. If your ratios are unhealthy because of an investment, remove the investment expenses from the analysis and see if the problem still exists.
- 19. How Do You Compare to Your Peers? • Benchmarks – To industry peers – Based on Line of Business / Business Model • Benchmark comparisons only as good as your data
- 20. What Benchmarks Exist? • Corelytics© by CoreConnex, Inc. (www.corelytics.com) • CompTIA sponsorship of Corelytics Financial Dashboard • S-L Index™ Included in Corelytics • S-L Index™ by Service Leadership, Inc. (www.service-leadership.com) • S-L Index™ Comprehensive Diagnostic Report© • S-L Index™ Quarterly Comprehensive Report©
- 21. • Trend analysis graphics • Benchmarks • Business model calculator • “Bolt on” for data from Your Accounting System – QuickBooks (automated) – MYOB (Australia, New Zealand - automated) – Other Accounting Systems (file import) • Goal tracking • Adjust data – try “what if” • Share progress to your team Dashboard Features
- 22. Your Financial Trends in Graphics
- 23. Dashboard for Financial Picture 1. Where are my current hot spots? 2. Where am I headed? 3. What’s my potential future? 4. What’s working and what isn’t? 5. How do I compare with my peers? 6. Am I on track with my plan? 7. How is my staff doing? 8. What are the key messages for my team?
- 24. 1. Where Are My Current Hot Spots? Leading Indicators show the current performance picture By line of business Peer benchmarks Compare to peers Track your goals S-L Index™ benchmarks and the Predominant Business Model© (PBM©) are proprietary to Service Leadership, Inc.
- 25. 2. Where Am I Headed? Use the “big picture” to understand your trends By line of business Peer benchmarks Basic trend lines Your goals S-L Index™ benchmarks and the Predominant Business Model© (PBM©) are proprietary to Service Leadership, Inc.
- 26. 3. What’s My Potential Future? Forecast your future high and low scenarios By line of business Peer benchmarks High and low scenarios Your goals S-L Index™ benchmarks and the Predominant Business Model© (PBM©) are proprietary to Service Leadership, Inc.
- 27. 4. What’s Working and What Isn’t? Drill down to see where action is needed By line of business Peer benchmarks Expense drill- down Your goals
- 28. 5. How Do I Compare With My Peers? Your business model has unique industry benchmarks Your revenue mix Using the PBM® Calculator Your model S-L Index™ benchmarks and the Predominant Business Model© (PBM©) are proprietary to Service Leadership, Inc.
- 29. 6. Am I On Track With My Plan? Define measurable goals, then track progress Your goals Peer benchmarks By line of business Chose any metric
- 30. 7. How Is My Staff Doing? Compare your payroll metrics to industry norms By line of business Peer benchmarks Multiple metrics Your goals S-L Index™ benchmarks and the Predominant Business Model© (PBM©) are proprietary to Service Leadership, Inc.
- 31. 8. What Are Key Messages For My Team? Create a monthly summary to communicate priorities Set goals Show progress Set priorities Assign responsibilities
- 32. • Meaningful business planning • Visualize business finances • Set & track goals • Monitor the bottom line • Drill into detail – profitability by line of business • Compare to top performers • Compare to same business model • Forecast performance • Communicate internal priorities Gives Small Business a Big Tool
- 33. Monthly Management Process: 30 Minute Action Plan dashboard
- 34. Recap • Design Your Chart of Accounts with Line of Business as a driving factor • Get all direct costs into GOGS • Analyze Key Metrics – Current State: • Gross Margin and Gross Margin % by LOB • Expenses as a percent of revenue – Are you Improving? Comparisons to Prior Periods (Months/Quarters/Year-to-Date) – Are you Meeting Your Goals? Comparisons to Budget/Forecast – Where Do You Stand in Comparison to Peers? Benchmarks
- 35. References and Additional Materials • CompTIA website (www.comptia.org) – Member Resource Center – under Business Management Finance • Corelytics – www.corelytics.com/ • Sign-up at – CompTIA.Corelytics.com • Service Leadership – www.service-leadership.com
- 36. CompTIA Benefit: Free Financial Report See your trends, financial strength and future forecast Free Financial Consultation CompTIA members get consultation with Financial Expert How? • Email: support@corelytics.com • Subject: Financial Strength • Text: Your contact information & your current accounting system
Hinweis der Redaktion
- Today’s presentation was developed as part of CompTIA’s Channel Training program, which offers a broad range of education to the IT channel on topics such as cloud computing, healthcare IT, security, and managed services, unified communications.CompTIA is the trade association advancing the global IT industry, with more than 2,000 member companies that include solution providers, vendors, and distributors.
- The Chart of accounts is what enables you to organize business transaction data for analysis. You can’t really manage a P&L without having a good underlying Chart of Accounts. The most frequent problem, particularly for small businesses, is that their Chart of Accounts doesn’t capture the business data transaction in enough detail to enable analysis…if you don’t capture the data properly, you can’t analyze it and won’t get value out of your bookkeeping/accounting and P&L management. For example, in this sample excerpt from a chart of accounts – as the business owner if you were to only capture all product sales into one account, you can’t tell how much you are selling (or whether you are profitably selling) PC’s versus Servers vs. Printers vs. Packaged software. Is that important? – it depends on your business. On the other hand, as the business owner, is it important to separately capture sales info about Servers versus PC’s? -- I don’t know but once again that’s a judgment call that you would need to make…It is possible, but infrequent, to have too many accounts in your Chart of Accounts and have it too complex…a good rule of thumb is that, if you don’t use most of your accounts on a routine basis, your Chart of Accounts is probably too complex. With that being said, it typically is better to be a little more detailed than you need instead of not capturing enough detail. Bottom line is that you, as the business owner or general manager, are the one who knows how you view the business and what data is important to decision-making – and the data that is important to decision making is the level of detail at which the Chart of Accounts should be at. If you don’t capture the data, you will leave business questions unanswered. If you leave the Chart of Accounts up to a bookkeeper or accountant who is not familiar with your business…or use the default chart that comes with an accounting package…I can pretty well assure you that you won’t get the information important to you and your P&L management will not be nearly as effective as it could, or should, be.The Chart of Accounts is something you design, implement and then, over time, adjust to meet the changing needs of your business and your recognition that you need more information.
- Let’s talk more about the chart of accounts and how it impacts the metrics you can analyze.The beginning point of any P&L management is gross margins. When you look at a P&L, the first line items you see are revenue line items followed by cost line items. When you subtract the costs from the revenues, the result is Gross Margin. Frequently, a Gross Margin Percentage is calculated by taking the Gross Margin dollar amount divided by the Revenue.Gross Margin, captured by Line of Business (sometimes known as Business Model) is important because it gives us the first indication of profitability of our business activities.Basically, you want your Chart of Accounts to collect your revenue and cost information separately by what is generally called “line of business”. This is a best business practice and will give you the best insight into your operational profitability.
- A line of business, or business model, is basically just a type of business that has different economics and/or business activity associated with it. E.g., product resale has a different set of economics, and typically different set of business activities, than project work or T&M work. As we all know, the margins on product resale (sales of products manufactured by major hardware/software vendors) have relatively low margins whereas we expect to make much better margins when we provide time-and-materials services or project services or sell, for example, software that we have developed. Typically, you will manage LOB’s very differently. Separating these lines of business in our chart of accounts, and collecting separate revenue AND cost information , will give us visibility into the profitability of our different activities. Your first indication that you have a problem in some aspect of your business will probably be either low or negative gross margins for a LOB.Most of the industry benchmarks are captured separately by Line of Business or Business Model. The two major sources of industry P&L benchmarks for solution providers that I am aware of – Service Leadership (which is Paul Dippell’s company) and Corelytics by CoreConnex both have defined LOB’s or Business Models underlying their benchmarks. I would (strongly) suggest that you work with one of these companies and follow one or the other of the LOB templates that these companies have developed in capturing your revenue and cost data because: it’s easy (reduces the thought required); the templates make economic and business sense in their definition; and they will enable you to make industry benchmark comparisons which we will talk about later.It’s important that your Chart of Accounts includes accounts for both revenues AND costs separately by Line of Business – if you don’t separate costs by LOB you will never be able to get to LOB Gross Margins.Until you reach a certain revenue size, these LOB definitions will work very well. Once you do get larger, you may want to consider separately capturing revenues and costs by geographic area (within LOB) and/or by customer type (within LOB) so you can calculate gross margins by these breakdowns.
- After defining the LOB revenues and costs into your Chart of Accounts, ensuring that your gross margin metrics are meaningful takes some work.On the revenue side, you need to break down invoices into line items that are separate by LOB and make sure that the bookkeeper/accountant records the receipts by those line item LOB designationsOn the cost side, you want to attribute as much of your costs and expenses to a LOB as makes sense. In general, all the product and material costs should be separately recorded by LOBOn the organizational side, it helps if your organization is organized by LOB or at least individual staff members are identified as to which LOB they work. Basically you want all their expenses -- salaries including both billable and unbillable time; Training, travel; office expenses, laptops, etc. to be attributed to the correct LOB. You also want to charge their benefits and payroll taxes to the LOB. Without being arbitrary about it, any cost that can be attributed to a LOB should be. If you have to split expenses and can do so such that it makes sense, then split them.You may have multiple accounts subtotaling to create a total Cost of Sales for a LOB depending on how much detail you want to capture.
- Selling General and Administrative expenses are costs that you can not attribute to a specific line of business or business model and can not easily allocate to a LOB. For example, if you have a salesperson who is out there selling multiple lines of business, their costs (that is, their salaries, travel, benefits, etc.) would be recorded as SG&A. Now if the salesperson was out there selling only, for example, managed services, then we would want to record their expenses into the managed services costs so it was reflected in the managed services gross margin but if they are selling multiple LOB’s then their costs would end up in SG&A.SG&A includes a wide variety of different costs – here are some examples – sales expenses, marketing expenses, executive salaries, rent and utilities, and various corporate expenses such as taxes, business licenses, insurance, legal expenses, accounting expenses, HR oriented expenses, expenses associated with internal information systems, etc. Each one of these different types of costs should have a different account code defined for it in your Chart of Accounts. Most of the time, unlike your gross margin lines of business that you will use for your revenues and costs, your bookkeeper or accountant will have a Chart of Accounts that has a laundry list of these type of expenses defined and you can use that – you may just have to add accounts to monitor costs that are unique to your situation.The key metric for SG&A is the line item’s percentage of revenue. For example, what percentage of revenue is being paid in rent every month. Or what percentage of revenue is going to sales expenses, or marketing?
- So here is an example of what I mean by SG&A expenses as a percentage of revenue. What this is telling you is that, for whatever company this is for, they are spending 18.3% of their revenues on selling, general and administrative expenses, the majority of which is going to sales expenses, marketing expenses, and executive salaries/benefits. Pct of Sales gets rid of the clutter of the numbers themselves (so you don’t get lost in the numbers) and replaces large numbers with smaller percentages – nice, simple metrics that bring home the impact of various costs on your bottom line. 3,987,709
- So the Chart of Accounts is the foundation and we have covered that. To reiterate, your P&L Management is only as good as your chart of accounts. To recap:Define your revenue and cost accounts in your Chart by LOB or Business ModelAttribute as many costs as you can to the LOBCalculate a Gross Margin and Gross Margin % for each LOB or Business ModelDefine separate SG&A accounts for each type of expenseCalculate the SG&A line items as a % of RevenueThese simple, first level metrics tell you where you are now but don’t tell you whether you are improving, or not. They also don’t tell you whether you are reaching your goals or how you are doing in relation to other solution providers. So let’s talk about stepping the metrics up a notch
- Given you know where are you through the Gross Margins and SG&A as a percentage of Revenue, the next question is: Are you Improving?The way to tell is by comparing this month’s results, or this quarter’s, or this year-to-date to prior periods (that is, prior months, prior quarters or previous year-to-date).You can, and should, compare Revenues, Costs, Gross Margins, and SG&A expenses to prior periods.You can compare to the same month, or quarter, or year-to-date of the previous year or to the previous period (by previous period I mean compare this month to last month or this quarter to last quarter). If you compare to the previous year results, it tends to eliminate any seasonality you have in your business but if you are on a high grow trajectory you may want to compare to the previous period instead of the prior year.Generally, when you compare whole dollar amounts by calculating variances (variances are the differences between two period’s results) you are checking to see if there has been growth. Variances should be calculated so that positive variances are favorable and negative variances are unfavorable – so on a financial statement the calculation has to change depending on which line item the calculation is being performed (i.e., a higher revenue is favorable so it is a positive variance whereas a higher cost or expense is unfavorable so it should be negative). By having favorable variances positive and unfavorable negative, it is easy to scan the financial report and identify where problems exist – negative variances, and negative variance percentages highlight potential problems.In this example, Product Sales have grown revenue-wise but, due to higher costs, have receded on gross margins which is probably not good. On the other hand, T&M Service has receded revenue-wise but produced the same gross margin, which may or may not be good.When you start comparing percentages you are looking at relational improvement or efficiencies. So looking at Gross Margin %’s, the Product Sales Gross Margin percentage has gone down by a sizable percentage but the T&M services margin has increased by almost the same margin. But, in total, because Product Sales are at a much higher level, the total gross margin has decreased substantially.Performing historical comparisons requires that you have captured the transaction data using the same account coding in prior periods…so at first when you establish your chart of accounts you won’t be able to perform historical comparisons and, while you need to adapt your Chart of Accounts to business changes over time, every time you change your chart of accounts you can be affecting your historical comparisons…So, comparisons to prior periods will enable you to tell if you are improving. You do have to be concerned about seasonality in the numbers depending on what you are comparing.
- After determining whether you are improving, the next logicalquestion is: Are you Meeting Your Goals?To tell whether you are meeting you’re meeting your goals, you’ll have to set up your goals as revenue goal numbers, cost goal numbers and SG&A goal numbers in your system. Obviously this requires some work but is a very good discipline to get into and is a best practice.In talking about goals, frequently you’ll here them referred to as budgets or forecasts, a budget being a number that you are aiming to make, a forecast being a number you anticipate making. To some it’s a semantic difference, to others it’s more philosophical. It’s really up to you how you view and set-up these numbers, that is, “goals”, but it is important that you have some discipline about it. In comparing the goals, you can compare them looking at individual months, quarters, and/or year-to-date, similar to the historical comparisons we just spoke about.You can, and should, compare Revenues, Costs, Gross Margins, and SG&A expenses to goals.In setting up your goals, you need to be aware of seasonal variations in your business. Revenues will typically vary in many solution providers by month, but some expenses (e.g., rent) typically do not vary. Similar to historical comparisons, both dollar amounts and percentages can be, and should be, compared to goals. So, comparisons to pre-established goal amounts will help you to tell if you are meeting your goals and where you are, and are not, meeting goal. Again, favorable goal variances should be shown as positives and unfavorable as negatives – making it easy to scan the report for potential problems.
- So if you know whether, or not, you are improving and whether or not you are meeting your goals, your next question might be: How am I doing in Comparison with Peer Businesses?The only way to tell is by comparing your financial data to that of industry peers. The industry peer data, when collected and analyzed, is called benchmarks. These benchmarks reflect data collected from tens or hundreds of other solution providers. These benchmarks are collected based on the line of business, or lines of business, or business models, that you employ when compared to that of peers. That’s why it is important that you construct your chart of accounts to separately collect data by the lines of business. Be forewarned -- these benchmark comparisons are only as good as your data – so if you don’t separate your data by line of business or chose the wrong line of business to compare, the comparison will suffer
- I’m aware of two industry benchmarks – Corelytics© by CoreConnex and the S-L (Service Leadership) Index™ by Service Leadership, Inc. Is anyone aware of any other benchmarks?Both CoreConnex and Service Leadership offer their industry benchmarks for comparison thru service agreements. To the best of my knowledge, both companies offer two levels of their benchmarks. CompTIA sponsors its members into the Corelytics Lite product at no cost for the first year. I will be walking you through a description of the Corelytics benchmarkI will leave it up to you to investigate these two products further, and any others you might find, and determine which product meets your needs. I do believe industry benchmarking is important to you in managing your P&L – so I would urge you to investigate these benchmarks, and any others you might find, and try one. So the following slides were developed by CoreConnex to describe Corelytics.
- Red = not meeting your goalsGreen = meeting or exceeding goalsOrange = within 20% of hitting goals
- S-L Index = benchmarks published by Service LeadershipService Leadership uses statistical data provided by Corelytics
- So I hope the presentation of Corelytics put into context how to analyze your P&L.To recap, the first step is to design your chart of accounts with revenues and costs being separated by Line of Business (business model) as the driving factor. Expenses that can not be separated by Line of Business become Selling, General and Administrative Expenses.Then you need to embed the account coding in your bookkeeping. When you issue invoices, have separate invoice types and/or line items by Line of Business. When costs and expenses are paid, make sure they are recorded to the proper account, by line of business if at all practical.Then, on a periodic (probably Monthly but at least bi-monthly or quarterly), you need to perform P&L Management by summarizing and analyzing key metrics.Gross Margin, Gross Margin Percentage, and expenses as a percent of Revenue are key metrics showing your current state. But you then need to put the key metrics in context by comparing them to prior periods – prior months, quarters and year-to-date versus the prior year. Those prior period comparisons will help show you whether you are improving, or not.Then to measure whether you are meeting your goals you need to develop budget or forecast numbers for the line items by LOB. By comparing the actual results to the budget or forecast you can determine whether you are meeting your P&L goals.Then, last but not least, you will want to know how you stand in comparison to your peers. That is accomplished by taking your financial results and comparing them to industry benchmarks, such as those in Corelytics and by Service Leadership. That’s P&L Management in a nutshell.
- There are a number of references and a lot of additional materials available on the Internet.For CompTIA Members, the CompTIA member resource center, under business management/finance there are a number of good presentations and whitepapers available. Specifically, there is a presentation about establishing a Chart of Accounts by Paul Dippell that I would recommend. There’s also a whitepaper on Expense Ratios as well as several other presentations and whitepapers on metrics. Corelytics (CoreConnex) has a wealth of information on their websiteAs does Service Leadership