President Obama coming to Pellissippi State

Discussion in 'The Thunderdome' started by NorrisAlan, Jan 5, 2015.

  1. bigpapavol

    bigpapavol Chieftain

    again, that permanent ripple isn't ever coming back and the cash flow you might have generated to pay to operate those hours will have to be attributed to costs of the day that business finally does arrive.
     
  2. rbroyles

    rbroyles Chieftain

    You cannot recapture yesterday. Many people also make the mistake of not expensing costs at their true percentage of sales/revenue. If an item costs $1 and your bottom line net is 5%, you have to have revenue of $20 to cover that item's cost. You would be surprised how many business owners would think it is determined by gross profit.
     
  3. IP

    IP Super Moderator

    Can you elaborate on this?
     
  4. rbroyles

    rbroyles Chieftain

    Many times I have heard someone talk about profit margins and how much they made on a sale, when they were talking about their gross profit which is revenue minus cost of goods sold. This is before you account for expense items such as rent, utilities, office expense, etc. as well as tax. The true profit is what is left after all costs are deducted giving net profit after taxes. The national average net profit after taxes is somewhere around about 5%. (mass retailers, super markets, operate on very thin margins, plus you are also including those with net loses). So if the margin is 5%, it takes revenue of $20 to cover every $1 of expense.

    At least that's the way I was taught to view business profit vs sales. You guys who are accounting pros please chime in with your thoughts.
     
  5. Volst53

    Volst53 Super Moderator


    The same is true with regular spending as well. If you put in taxes, medicare, and SS, I have to make a dollar and thirty cents before I can spend the dollar.
     
  6. bigpapavol

    bigpapavol Chieftain

    it's not just a margins debate. Rapidly growing companies go broke all of the time because cash flows sustain a company and a P&L is just a bad scorecard. Timing of cash flows is everything in operating a company, particularly a small one. Growth means balance sheet expansion and that expansion eats cash, whether it's flowing through an income statement or not.
     
  7. rbroyles

    rbroyles Chieftain

    I could not agree more. We expanded our territory from Tennessee, Kentucky and Alabama to include Mississippi, Louisiana and Arkansas. The increase in sales almost killed us, due to an enormous increase in finance customers vs cash customers resulting in a greatly diminished cash flow. Also increased our returns disproportionately as you might guess. Nothing like expecting a $50,000 or more settlement check from one of your paper buyers, and getting a debit notice. Now that will make you scramble and earn your pay.
     
  8. justingroves

    justingroves supermod

    Certain clients, I have to wait 60 days, some 30, some 15. You take that into account when you bid and bill.
     

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