Hows this for a different look at a business?

The numbers are all the same, but the overhead costs have been reorganized into activities.

Comparative Income Statement using Activities
  20X2   20X1
Revenues:  
Sales 8,924,000   7,593,200
Other 8,300   12,700
  8,932,300   7,506,900
Cost of Goods Sold 5,505,000   4,528,900
Gross Profit 3,427,300   3,077,000
Marketing Activities:  
Direct Mail Program 156,000   212,000
Trade Shows 83,000   87,000
Networking 65,000   43,000
  304,000   342,000
Selling Activities:  
Sales Meetings 12,500   14,000
Contract Development 6,400   18,500
  18,900   32,500
Operations Support Activities:  
Sales Order Processing 65,400   63,800
Purchasing 765,000   723,000
  830,400   786,800
Other Support Activities:  
Administration 1,224,400   929,800
Business Planning 268,000   240,000
Personnel 126,000   131,000
Accounting 85,000   90,000
  1,703,400   1,390,800
Income before Income Taxes 570,600   524,900
Income Tax 199,300   171,900
Net Income 371,300   353,000

Isn't this better?

  • Advertising is starting to look managable.
  • The various business processes that the Company is investing in has become clear. Now you can permanently eliminate the excess paperclip expenditures by changing the various processes that use to them to using staples instead.
  • The payroll expense is also more manageable. You now have options besides just firing people. Instead, you can reorganize how much labor goes into the various processes and produce true efficiencies.

But, we can do even better than this. Now that the income statement is talking to us, we can apply some more imagination to make it speak sweet nothings in our ear. An Even Better Approach

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