Business Counsel A Forum for Ideas and Exchange: Overhead Performance Measurements

Business Council: A Forum for Ideas and Exchange
Intellect by Lori Williams
Chief Strategist for LW and Associates
and Founder of Business Simply Put

http://blog.lwandassociates.com

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Lori is the owner of a LW and Associates, a business consulting firm specializing in strategy and finance. As the Chief Strategist, Lori provides businesses with growth strategies designed to increase revenues, profitability and build long-term sustainable growth.

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Lori holds an MBA from Pepperdine University, BS Business and Management, an AA in Medical Science and a Practitioner’s license in NeuroLinguistic Programming. She is an adjunct professor at the Lloyd Grief Center for Entrepreneurial Studies at USC, teaching the Business Plan Class and Feasibility Studies. She has been a requested speaker at business organizations and has addressed esteemed audiences such as the IBM Big Blue Alumni, City Club, World Savings Bank, Citibank, and members of the Small Business Development Center located in California and Texas.

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Business Counsel A Forum for Ideas and Exchange: Overhead Performance Measurements

Overhead Performance Measurements

Overhead Performance Measurements monitor changes in overhead expenses (SG&A). This chart complements the Profitability Performance Measurements by providing a breakdown of the individual overhead accounts.

The overhead data can be monitored month/month and/or year/year. Percentages are used to measure the relationship between the data and identify changes.

When reviewing the chart you are looking for spending fluctuations in comparison to an established budget. Additionally, the results should prompt business questions regarding budget appropriations and return on investment. For example, if the marketing account increased, you may want to know if the investment resulted in an increase in sales. If the insurance account increased, you may want to consider getting competitive bids next time the insurance is up for renewal.

If it is determined that the increase is permanent, the revised budgetary number can be plugged into the Profitability Performance Measurement chart (as an increase in SG&A) to identify how the cost increase will affect profitability. Management may need to determine how to counter balance the increase by increasing sales, decreasing production cost or decreasing a different overhead account to negate the increase in SG&A.

Excerpt from the book, Simple Math Calculations To Monitor Your Company's Performance: Monitor Company Sales, Overhead And Profitability, which can be purchased as PDF format on www.BusinessSimplyPut.com