You can set up analysis types to use when you run the profit and loss report. You can then use the profit and loss report to: - Track the profitable departments or regions
- Seek insight to the revenue and costs of projects
- Analyse the performance of sales personnel
NOTE: Assign transaction analysis types to transactions to use them on reports. About profit centres In a business, treat profit centres as sections that are their own business. For example: a business sometimes has multiple locations, each generating its own revenue. 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 structure The 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 system fixes the top-level ledger accounts: - Sales
- Direct Expenses
- Overheads
Your chart of accounts sets 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.
▼ Report by revenue source When setting up transaction analysis types, think about the revenue sources you have. Group them into the categories that you want to analyse. Different businesses use analysis types in different ways. Here are some examples: Construction Transaction analysis name: Revenue Sources Categories for the analysis type: - 01 Blueprints
- 02 Building materials
- 03 Labour
- 04 Other
eCommerce Transaction analysis name: Revenue Sources Categories for the analysis type: - 01 Clothing
- 02 Shoes
- 03 Handbags
- 04 Belts
Restaurant Transaction analysis name: Revenue Sources Categories for the analysis type: - 01 Dine-in service
- 02 Beverages
- 03 Alcohol
- 04 Takeaways
▼ Report by salesperson 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 Nicholas
- 03 Grace Stockwell
▼ Report by regions or department 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 clothing
- 02 Men's clothing
- 03 Children's clothing
- 04 Other
Calculate margins With analysis types assigned to transactions, it’s simple to calculate margins. As a result, you can see where your profits are coming from. ▼ Example of a textile manufacturing business | | Shoes | Bags | Belts | Other | | 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’ll also be able to have further insight. See the example below. Although Peter is achieving fewer sales per month, he’s 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% | | | John Nicholas | | | 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% | ▼ Example of a UK clothing business | | 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 insights Use multiple analysis types for one transaction, and gain even greater insight. See the example below. Although England achieves fewer sales per month, it’s 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% | | | | | | | | | | 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% |
For more information, read our article on the Profit and Loss report. |