Discerning The Meaning Behind Your Company’s Numbers

Discerning The Meaning Behind Your Company’s Numbers

Reporting your end of year financials is mandatory for anyone doing business in Singapore. The standards vary with the type of business. There is Financial Reporting Standards (FRS) for large and medium business organizations, SFRS for small business outfits, and Charities Accounting Standards for charities and societies.

Although the standards vary, the objective is the same, to inspire confidence in the stakeholders of the financial well-being of an entity.

For the business leaders’ financial reports provide an indicator of the company’s performance. Outsourcing to competent accounting firms in Singapore will help breakdown each key parameter and get deeper insights to trigger unique responses.

Here’s a look at some of the key financial figures and what they mean and what you should do when they are not so favorable.

Gross Revenue

Gross revenue is an indicator of how much earnings and the potential earnings your business makes holding all things constant. It does not factor the costs incurred to secure the earnings.

Movements in the gross earnings figures could mean changing market conditions for the external consumer of the reports. However, it could have a different meaning for the executive.

Perhaps the movements could be as a result of a shift in sales strategy or innovation.

As a business leader, a dip in the gross revenue should trigger a correlation between the trends in sales and significant internal events as well as external happenings. If it was triggered internally, have a more in-depth look at the surrounding circumstances and address accordingly.

Gross Profit

Gross profit is the overall revenue less the cost of goods sold (CoGS). There are two types of CoGS: direct materials costs and direct labor costs. Like the gross revenue, gross profits often fluctuate during the trading period. But what’s more essential than the fluctuations or the closing figure is the overall trend.

Dwindling gross profits indicate that there’s a problem in either the pricing or costing of the products. As the business leader, you should review the pricing strategy, job costing, efficiency and renegotiate prices with your key vendors. You should also countercheck your direct and indirect costs estimates. The best accounting firms in Singapore will help you avoid underestimating the direct and indirect costs.

Net Income

Net Income is what’s left after you take out the operating, administrative and other expenses from your gross profit. It is the bottom line for the business.

When the business has low net profits, despite good figures on gross revenue and gross profit, it means that the markup or profit margins are still too little. In turn, the margins are not sufficient to absorb the costs associated with each product sold.

That means the pricing could be faulty as well as the costing.

Business leaders should regularly monitor net income figures and trends, identify reasons why dips and surges occur and respond accordingly.

Like the captain of a ship with hands on the helm, business leaders should always keep tabs on the pulse of the company. That means constantly monitoring and adjusting to steer the ship in the right direction. Unless you can hire and maintain a CFO, it may be quite difficult to keep up. However, you can outsource to leading accounting company in Singapore and reap the benefits of having CFO level advice at a fraction of the cost.

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