Wrapping up your books might sound nice. Wrap those books up in bows and send them over to a bookkeeping or accounting professional. Job done.
Actually, a lot of the financial responsibilities of wholesalers remain in the hands of managers. They need to make sure that their finances are in order, manage inventory counts, review and evaluate profit and loss statements, compare those statements to previous years, consider future budgeting, and follow up on invoices.
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This chunk of tasks seems intimidating. Let’s break it down a bit.
There are a few issues around understanding reports, especially when considering the steady push and pull of wholesale financials. Supply chains can be very complex systems for wholesalers as they need to maintain volumes of merchandise while also relocating products to storage facilities, other warehouse locations, or buyers.
The bottom line of year-end financials is making sure all expenses are entered into your accounting software. But once compiled, financial reports can be confusing to read and riddled with irrelevant information. And then there’s the issue of not knowing what to do with the information once it is decoded.
What’s the point of the numbers if you can’t read, understand, and act based off of them? Math is hard enough without the practical aspect.
Review and evaluate your profit and loss statement
Before we consider what to do with our information, let’s talk about how to get it in the first place, and then how to organize it.
A forklift takes care of your physical inventory, but it can’t do the heavy lifting of your inventory numbers. That’s stocktake!
For that job, you need an inventory management system. Keeping track of your numbers this way is a no brainer.
With multiple locations and employees, wholesalers need transparency (or visibility). Therefore, you need something live. Cloud-based inventory management can give you an accurate and proactive look into your inventory for accounting purposes.
Veem is partnered with your favorite accounting software. Find out how to easily integrate here.
Without real-time visibility, wholesalers may experience some pressure based on supply and demand.
For this reason, visibility needs to be maintained year round, year-to-year, and everything in between, in order to spot issues as they occur and to avoid the stress of the count at the end of the year. Don’t make the count a year-end “final boss.”
To consider the profit of your business, you’ll have to bear in mind a combination of things. First, the Cost of Goods Sold (COGS) must be deducted from the income. What’s left shows the Gross Profit or Loss.
Next to consider is operating expenses, which include transportation, accounts payable, marketing, storage, and everything besides COGS. Add these expenses together and subtract the total from the Gross Profit and you’re looking at Net Profit/Loss for that period.
This information gives managers the ability to reflect on sales and profits for a specified period. Without chunking Net Profit/Loss, it’s difficult to measure statements between periods.
Compare statement to previous statement periods
To assess where issues are occurring and to get a clearer picture of what your overall profit is, you need to make comparisons.
There’s no doubt that you’ll see variations between numbers and trends from month to month, even year to year. But how can you tell which variation is an anomaly in your data? By comparing statements across various periods.
It’s important to recognize the big picture and not put too much focus on minor trends. There will be fluctuations, which is an important fact to recognize when understanding the present and the future.
With great information comes great responsibility. You’ve worked hard to collect and understand your statements.
Sorry, but that’s not where the job ends. The next task is to act based on those findings.
The future of your business relies on financial planning, budgeting, and forecasting. Without reviewing statements, you can’t plan for the future. Your budget rests on your profit and your profit is an open book, if only you have the skills to review it.
Follow up with unpaid invoices
Chasing payments can be exhausting, and it’s not really something a lot of wholesale managers have the time, energy, or grit for.
Why chase payments, when your payment platform can do it for you? With Veem, you can request payments from customers, without any awkward confrontation.
Accurate year-end bookkeeping starts with making sure all the income and expenses are recorded and up-to-date. If there are any outstanding invoices, either on your end or the buyer’s, get a handle on them immediately. Get unbilled projects in order too so they can be accounted for.
Of course, your books need to account for any loans, interest, outstanding invoices, or developing projects. Every little thing will affect the numbers, which is okay if you know where the difference is coming from.
Don’t be scared of your books. The past, current, and future can be so much clearer if you can maintain a system that helps you visualize the demands of your business and supply chain.
Your finances shouldn’t scare you. The real danger is with papercuts. Just another reason to digitize.