Evaluate the profitability of a company from different angles

As money is at the heart of an entrepreneur's objectives and activities, profitability is naturally at the heart of his concerns. After all, he or she aims to achieve the best possible output. This is why the entrepreneur should ask himself which products or services bring in the most and which bring in the least. It may also seek to determine which products and services generate the most spending, and how to allocate its resources and energy. The profitability of one's activities can thus be evaluated at different levels, depending on what one wishes to measure.

Profitability by Classes (QuickBooks Online® Plus)

A company can calculate its profitability by:

• industry (e.g. IT consulting services, financial consulting services, training consulting services)
• division (MTL division, QC division, RDL division)
• profit center (external sales, internal sales, call center, etc.)

For each income associated with the class, an expense is also associated with it. This allows the company to more easily follow, in its financial reports, the operations specific to each of its sectors of activity. The company can then determine where to concentrate its resources.

However, accounting classes should not be confused with categories of products or services. Categories are used to logically group the different items that you sell to your customers, in order to allow your sellers and your customers to find their way easily.

You can assign a class to an entire transaction (invoice and invoice to pay) or to an transaction line.

Profitability per project (QuickBooks Online Plus)

A company can also assess its profitability by looking at the different projects it carries out. A construction company may, for example, choose to calculate the profitability of each of the houses it builds. She will thus be able to see that certain types of house construction are very profitable while others are not very profitable, and seek to understand the reasons why. As with classes, project expenses are taken into consideration when accounting for revenue and project costs.

Profitability by Location (QuickBooks Online® Plus)

The different operations are assigned to respective locations, such as stores, cities or sales regions.

Conclusion

It is possible to create different reports allowing you to monitor your profitability from several angles. This way, you will be able to realize exactly under what circumstances you are at risk of losing money and make sure you put things right. Also, you will know exactly what to bet on to generate ever-increasing profits. This is a very profitable way to take advantage of your accounting software!