Monitoring Business Performance

The Profit and Loss Statement provided one very important method for monitoring the performance of a business.

The performance can be monitored through the Profit and Loss Statement business can

Let us suppose, that the business in question is a football club which derives a proportion of its income from clubhouse operations and a proportion from running football programs.

In order to be able to manage the operations of the club effectively, the main objectives of management will be to:

	Increase the patronage of the clubhouse Promote the business Attract more customers to the bar and gaming operations Provide good service to customers
	Ensure the bar is running profitably Maintain a good profit margin on everything sold at the bar. Control bar staff employment costs Modify hours of opening to respond to demand
	Grow the participation levels and membership of the club Promote the club in the community Ensure football programs are well organised Foster a positive club culture
	Run football programs profitably Develop and work within a budget for football programs Charge appropriate fees to cover the costs of the programs and make a profit
	Control the overheads of the business Control costs such as electricity, insurance, telephones, office machinery, printing and stationery, etc.

These business objectives provide very good clues as to what information the management committee need on a regular basis.

Each month, the management committee should receive and review important information on how well the club is going according to these objectives.

The sources of this important information are as follows:

A Profit & Loss Report should be produced each month and discussed at committee meetings. It is a key tool for monitoring and managing the business performance.

Take a look at a two page P & L Report for the Black Stump Soccer Club.

The sample Profit and Loss Statement is divided into three main sections:

• Club Income (in Light Brown and labeled A)
• Cost of Sales (in Green and labeled B)
• Overhead Expenses (in Light Blue and labeled D)

This Profit and Loss Statement enables us to examine closely how well the club is running in regard to Gaming, Bingo, Bar, Canteen and Football Programs.

This can be achieved by extracting figures from the P & L as follows:

For example:

So provided, the accounting system is set up correctly, and financial data is inputted correctly, there is key information in the Profit and Loss statement that enables managers / the management committee to monitor the business performance.

This key information is much more than simply the "bottom line" i.e. the Net Operating Profit.

In the above example, the management committee should investigate the Canteen operation, as something is not right. Most items in a canteen are sold at double the price of the purchase price and more.

Furthermore, managers / the management committee should keep an eye on the loss sustained by Soccer Programs. At this sim months stage, the loss on Soccer Programs is $43,366 which is considerably less than the net income gained from gaming machines of $76,703. Therefore the management committee are in control of the costs of the Soccer Programs.