The formats of financial statements are, pretty much, standardized for most types of businesses. However, when it comes to the importance of different accounting heads for different kinds of businesses, it’s a different story altogether. What this means is that what might be an important consideration for one kind of business might not even matter for another. Here are some of the important accounting heads and considerations for a wholesale business:
Volume of Sales
One of the most important accounting heads, for a wholesale business, is the volume of sales. Why is that the case? Well, when you talk about a wholesale business, the backbone of the generated revenue (and profits) lies in the volume of the goods sold. It’s because the difference between the cost of the goods and the price at which they are sold, in the case of a wholesale business, is not as significant as it might be in other modes of business. Keeping an eye, therefore, on the volumes of the categories of goods sold is important, when it comes to making the relevant business decisions.
Commission is the percentage of profits from sales that is given to the designated sales teams responsible for the sales, both inside and outside the agency. When you talk about a business, the business would obviously wish for the amount of proceeds paid as commission to be minimal, right? The amount of commission paid out to the sales teams varies according to category of goods under consideration. If the goods under consideration already have a thriving market, then the commission paid out to the sales team would understandably be lower, right?
Discounts are something that wholesale businesses are on the lookout for…always! If everything else is held constant, wholesale businesses tend to lean towards such brands and suppliers that offer them discounts on their products. The utility of these discounts to wholesale businesses is more than the mere saving of a little cash. If you think about it, if wholesale businesses get discounts on their purchases, they’ll be able to forward those discounts to their customers. This, in turn, will make the wholesale business standout among its competitors, which will benefit the overall business.
Marketing and Selling Expense
When you talk about the marketing and selling expenses, a wholesale business would prefer them to be as low as possible. Why? Well, because it will ultimately come out from the commission that the wholesale business receives for the selling of goods. If, for example, the marketing and selling expense per item, under a category of goods, exceeds the commission received for the sale of that item, then it means that the business would have been better off if it hadn’t sold that good in the first place, right? When making the decision on what to sell and what not to sell, marketing and selling expense should play an important role.
A wholesale business can be lucrative, no doubt, but that doesn’t mean that there’s no need for some expert accounting advice. If you are in need of some expert advice, then SKB Accounting has got you covered!