About profit centresIn a business, treat profit centres as sections that are their own business. For example: a business may have a few locations each generating its own revenue. Your business may also have separate profit centres. Each can have its own Profit and Loss report. This allows the manager of each profit centre to analyse their performance. In any business, profit centres are important. They determine which departments or locations are the most profitable. About the Profit and Loss report structureThe chart of accounts is a listing of all your nominal ledger accounts. Categorising each account determines its placement on the Profit and Loss report. The ledger accounts in the top level are fixed: - Sales
- Direct Expenses
- Overheads
Your chart of accounts determines the ledger accounts at the next level. For example: - Sales – Products
- Sales – Services
- Cost of Sales – Goods
- Cost of Sales – Materials
- Marketing
- Employee Benefits
- Rent and Rates
- Travel Expenses
- Insurance
Transaction analysis types allow you to break the report structure down further. We can use more meaningful categories. Allocate Transactions such as invoices, credit notes, and bank transactions to one or many analysis types. For example: assign a sold item to a specific revenue stream and salesperson..  NOTE: To report by customer, supplier or project, use group analysis types.
When setting up transaction analysis types, think about the revenue sources you have. Group them into the categories that you'd like to analyse. Here are some examples of the analysis types different businesses may use: ConstructionTransaction analysis name: Revenue Sources Categories for the analysis type: - 01 Blueprints
- 02 Building materials
- 03 Labour
- 04 Other
eCommerceTransaction analysis name: Revenue Sources Categories for the analysis type: - 01 Clothing
- 02 Shoes
- 03 Handbags
- 04 Belts
RestaurantTransaction analysis name: Revenue Sources Categories for the analysis type: - 01 Dine-in service
- 02 Beverages
- 03 Alcohol
- 04 Takeaways
Setting up transaction analysis types for salespeople is simple. Create the analysis type and then add a category for each salesperson. For example:Transaction analysis name: Salesperson Categories for the analysis type: - 01 Peter Taylor
- 02 John Nichols
- 03 Grace Stockwell
Setting up transaction analysis types for regions or departments is simple. Create the analysis type and then add a category for each one. For example:Transaction analysis name for a clothing business in the United Kingdom: Region Categories for the analysis type: - 01 England
- 02 Wales
- 03 Scotland
- 04 Northern Ireland
Transaction analysis name: Department Categories for the analysis type: - 01 Women's wear
- 02 Men's wear
- 03 Children's wear
- 04 Other
Calculate marginsWith configured analysis types and transactions allocated, it is simple to calculate margins. As a result, you can see where your profits are coming from. You can see where you may want to invest more resources.
| Shoes | Bags | Belts | Other |
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| Sales | 78,560 | 94,320 | 29,870 | 5,544 | | Direct Expenses | 32,780 | 34,770 | 14,500 | 3,300 | | Gross Profit | 45,780 | 59,550 | 15,370 | 2,244 | | % Profit | 58% | 63% | 51% | 40% |
Analysis types like this allow you to see a break-down of sales by salesperson. You will also be able to have further insight. See the example below. Although Peter is achieving fewer sales per month, he is making more profit per item sold. As such, performing better than John.
| Peter Taylor |
| Shoes | Bags | Belts | Other | TOTAL | | Sales | 88,706 | 76,403 | 12,549 | 1,250 | 178,908 | | Direct Expenses | 34,340 | 31,770 | 5,600 | 620 | 72,330 | | Gross Profit | 54,366 | 44,633 | 6,949 | 630 | 106,578 | | % Profit | 61% | 58% | 55% | 40% | 60% |
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| John Nichols |
| Shoes | Bags | Belts | Other | TOTAL | | Sales | 68,560 | 94,320 | 29,870 | 5,544 | 198,294 | | Direct Expenses | 31,080 | 44,770 | 18,500 | 3,050 | 97,400 | | Gross Profit | 37,480 | 49,550 | 11,370 | 2,494 | 100,894 | | % Profit | 55% | 53% | 38% | 45% | 51% |
With configured analysis types and transactions allocated, calculate margins by region or department. As a result, you can see where your profits are coming from and where you may want to invest more resources.
| England | Scotland | Wales |
|---|
| Sales | 78,560 | 94,320 | 29,870 | | Direct Expenses | 32,780 | 34,770 | 14,500 | | Gross Profit | 45,780 | 59,550 | 15,370 | | % Profit | 58% | 63% | 51% |
Analysis insightsUse multiple analysis types for one transaction, and gain even greater insight. See the example below. Although England achieves fewer sales per month, it is able to sell at higher prices. These higher prices result in higher profits per sale.
| England |
| Men's Wear | Women’s Wear | Children’s Wear | Other | Total | | Sales | 88,706 | 76,403 | 12,549 | 1,250 | 178,908 | | Direct Expenses | 34,340 | 31,770 | 5,600 | 620 | 72,330 | | Gross Profit | 54,366 | 44,633 | 6,949 | 630 | 106,578 | | % Profit | 61% | 58% | 55% | 40% | 60% |
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| Scotland |
| Men's Wear | Women's Wear | Children's Wear | Other | Total | | Sales | 68,560 | 94,320 | 29,870 | 5,544 | 198,294 | | Direct Expenses | 31,080 | 44,770 | 18,500 | 3,050 | 97,400 | | Gross Profit | 37,480 | 49,550 | 11,370 | 2,494 | 100,894 | | % Profit | 55% | 53% | 38% | 45% | 51% |
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