Report name: Sample Forecast

Break Even Sales and Profitabilty

Most important for any seasonal business, this forecast break-even chart measures the point at which sales activity goes from loss (red) to profit (blue).

Break Even – Planning and Forecasting

When using Figurewizard to plan your business going forward, your objective will be to see that break-even starts to generate profits as soon as possible..

A break-even point coming just one month earlier is going to deliver dramatic benefits for profits and cash flows. That calls for careful, detailed planning which is what Figurewizard’s What-If Calculator / Planner is for. Here's how to use it for the best.

Break Even – Improving Gross Profit Margin

The simple approach to improving gross profit margin is to increase prices. Never easy at the best of times, thanks to the coronavirus pandemic that is likely to be very difficult in the medium term.

However, following lockdowns to contain the virus, many opportunities to negotiate reductions on the cost of goods sold which in turn will increase gross profit margin are likely to be on offer.

To see what this means, go to the sample What-If Calculator and add one percentage point to gross profit margin. You will see that returnimg significant improvements for gross profit and additional improvements for both operating profit and your position at the bank. This is what you should be aiming for.

Break-Even – Wages and Fixed Overheads

Cuts in the wage bill should be a last resort but government aid should first be taken into account. For example, if that is worth 10% of current wages, that reduction should first be applied to wages in What-if.

Fixed overheads are made up of the cost of running the business with the exception of interest charges which are solely concerned with financing.

Fixed overheads are your next target and potentially a big one when planning improvements to profitability and cashflow. The big advantage here is that unlike suppliers of goods, there are many more alternatives to negotiate with.

Break-Even – Variable Overheads

The two big variable overheads are carriage out (cost of shipping customer orders) and the provision for bad debts. These two are charged to monthly overheads in-line with monthly sales.

There may well be opportunities for reducing the cost of carriage out as a percentage of sales but with provision for bad debts, there is a chance this may actually need to increase. On the other hand you ought to be protecting your business from this by minimising your exposure to customers who are likely to default.

One way of doing this is to require pro-forma payment (cash with order) as a condition of supply (recommended).

What-If and Stock Control

Another feature of What-If is the value of stock at the year-end. This can also be reduced simply by selecting the percentage by which you wish to reduce it.

While this has only a minimal effect on profits, it does represent a substantial improvement in cash flow. 

Cash is going to be King post-coronavirus. Being able to use improved cashflow to offer accelerated payments in return for substantial reductions in the cost of purchases and perhaps some overheads will offer huge potential benefits. Significant reductions over time will also create a chain reaction for greatly improved profits and liquidity.

To this end try selecting Factoring / Supply Chain Finance in What-If and see what that can do for cash too.