Having produced a first draft of your financial projections it is possible to make significant improvements in the profitability (net income) of the business by making minor adjustments to four key areas of the income statement. This profit improvement calculator shows the impact on net income of these adjustments.
The four key areas can be summarized follows:
- Unit selling price
- Unit cost
- Unit sales
- Operating expenses
Using the Profit Improvement Calculator
The profit improvement calculator which is available for download below is used as follows:
Before Adjustment Column
Details relating to the current position are entered in the Before column of the calculator.
Enter Product Selling Price and Cost
Enter the current unit selling price and cost of the product in the before adjustment column. In the event that there are multiple products, a weighted average should be used. The profit improvement calculator works out the gross margin and gross margin percentage for the product.
Enter Unit Sales
Enter the current unit sales volume. Based on the product details and the unit sales volume, the calculator calculates the total revenue, cost of sales, and gross margin for the business.
Enter Operating Expenses
Enter the amount of the current fixed operating expenses. The calculator works out the net income and net margin percentage of the business.
Percentage Change Column
Enter the percentage change to each of the four key areas. If the change is an increase enter a positive percentage e.g. 3%, if the change is a decrease enter a negative percentage e.g. -3%.
Enter % Change in Selling Price
Enter the percentage change in the unit selling price of the product. The profit improvement calculator works out the revised selling price.
Enter % Change in unit cost
Enter the percentage change in the unit cost of the product. The calculator works out the revised unit cost.
Enter % Change in Unit Sales
Enter the percentage change in the unit sales volume. The calculator works out the revised unit sales.
Enter % Change in Operating Expenses
Enter the percentage change in the fixed operating expenses of the business. The calculator works out the revised operating expenses.
After Adjustment Column
The profit improvement calculator works out the product details and income statement information following the adjustments to the four key areas and presents these in the After column of the calculator.
Finally, the calculator shows the change and percentage change in net income as a result of the adjustments.
Profit Improvement Calculator Download
The profit improvement calculator is available for download in Excel format by following the link below.
Users use this business improvement calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a profit improvement calculator template that you might use when preparing financial projections in Excel. It is purely illustrative of a small business accounting calculator. This is not intended to reflect general standards or targets for any particular company or sector. If you do spot a mistake in the financial calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.