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The Path to Profitability: Calculating Seven Key Financial Performance Indicators
Steve L. Wintner, AIA, co-author of Financial Management for Design Professionals: The Path to Profitability, developed an alternative format of the accrual-based, Profit and Loss Statement (P&L) to provide a simple method for calculating several key financial performance indicators. Among these are the two essential indicators for every firm: overhead and profit. The difference between this P&L format, which is designed specifically for professional service firms and more common P&L formats, is primarily in the setup of the Revenue and Direct Labor sections.
With this format, you can easily calculate seven key financial performance indicators: Net Multiplier, Overhead Rate, Break-even Rate, Utilization Rate, Aged Accounts Receivable, Profit-to-Earnings Ratio and Net Revenue per Employee. In addition, the P&L will provide an opportunity to recognize developing trends and the possible need for adjustments to the firm’s operations. This financial reporting structure permits the financial accounts to be grouped based on Wintner’s recommendations to allow for the ease of calculation needs for the key metrics he outlines.
Steve L. Wintner, AIA, is the founder and principal of Management Consulting Services. He has been a licensed architect since 1968, with NCARB certification and registration in California, Texas and New York.
Producing the Wintner P&L statement requires some special setup and reporting considerations in Ajera or PORTFOLIO. For pricing information and assistance with this process, please contact Axium Professional Services at 800.637.2727.
For more detailed information about the Wintner Profit and Loss Statement, visit the Solution Center and search the Knowledgebase for article 3994.
For more information about Steve L. Wintner, AIA, visit his website at www.managementconsultingservices.com.
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