This article gives an insight into how to calculate and distribute profit in an organization.
Profit is also known as gain, surplus and its is the excess over expenses made from the sales of goods and services.
Many get excesses but they dont cross check them with the expenses which i call face profit.
For example: A trader who sells clothes and have 2 staffs just got some wares valued at 2000naira, transportation cost 200naira, his feeding during the cost of purchasing cost 100, he buys airtime me of 100naira to call his clients, he also bought some stationaries for office use for 150, he pays his 2staffs the total sum of 800.At the end of selling all the wares he purchased the trader sold all the whares for 10000naira.
The face value profit is 10000-2000 which is 8000naira . If the trader declares that as his profit then he would close the business down very soon.
To get the real profit he have to add all the expenses (2000+200+100+100+150+800)=3350
The profit will be 10000-3350= 6650naira as against the initial 8000.
This is the company’s profit in as much that the company is not servicing any loan or in debt.
If the conpany is servicing loan or paying debt then the calculated cost must be removed from the realised income before the profit can be determined.
To know your actual and real profit, all expenses no matter how little must be deducted from the sales or inflow realised.
HOW TO DISTRIBUTE PROFIT
- Many companies have shut down all because they don't calculate their profit properly or distribute the wealth properly.
Here are some tips to distribute wealth.
The company must decide from the onset the different percentage on how profit will be shared. Thats the first decision the company should put in place
REPLOUGHING OF PROFIT: A percentage of the profit should be re invested in the company i.e the company should increase their input to get more output for sales.
BUY APPRECIATABLE ASSET: The company should purchase asset like land and building that appreciates as time goes on also the company can seek proffesional advice and invest in stocks and shares.
DIVERSIFY: The company can also start up a business that is close to the field they are operating as it would help them sustain their inflow.
MOTIVATE STAFF MEMBERS: A certain percentage of the excess should be shared among the staff as its incentive as it would be a source of motivation and alsoincrease the staff productivity.
FIXED SAVINGS: Depending on the company’s plan they can fix some amount of the excess in the bank as it would yield interest in coming time.
A company that has a going concern i.e wish to stay in business for unseen number of years must be able to calculate his profit well and also distributes the profit wisely.