This 28 year old Wheeling, IL company had never created a budget for the upcoming year. They had no idea of the expected profitability of any of their nine separate product lines. Nor did they know if the company, overall, was going to be profitable. In actuality, the owner didn’t know whether any line was becoming a cash cow or boat anchor to overall company profitability.
We assembled four years of financial data and reports. This included historical monthly income statements and supporting financial data on each of the nine product lines. We developed a trend analysis on the sales and expenses of each of the product lines, enabling us to predict sales for the next year. A detailed mini-income statement was created, calculating the gross margin for each line, and tracking that over the upcoming 12 months.
Sales and administrative expenses were also projected. Detailed payroll records were used so that bonuses and pay increases could be calculated for the coming year. The resulting report not only detailed the metrics that we used in our analysis, but charted the historical sales and margin contribution of each product line to the company’s overall profitability.
The final result was a budget with supporting spreadsheets, providing an expected profitability for the company and each product line for the upcoming year. In addition, we provided a list of recommended changes to the company’s financial operations to smooth out some unnecessary volatility in the monthly reporting. Our approach and services allowed, for the first time, the company could look into the future, and confidently make plans based on the detailed analysis and projected profitability of company operations.