Potato Chips business
Bizna Kikao is an open platform where Bizna Club members can exchange ideas on how to improve their personal finance and business well-being.
According to David Ngatia, a business consultant, the first question you should ask yourself is, what do your financial books say?
When you buy potatoes, travel to the market, call for orders, pay business rent, cooking fuel, etc., do you record (when money goes out of the business)? Do you record when you sell (when money comes into the business)? Do you calculate your daily cash flow?
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Business records are important in spotting loopholes in your cost and expenses. For instance, they might help you determine whether your staff are stealing your merchandise.
Ngatia adds that money doesn’t grow wings and fly off from pockets, drawers and safes. Rather, the problem comes when you don’t keep proper financial records or use more money than your business generates.
How to Keep Business Records
You can use manual records like books or digital formats like smartphones and computers for proper record keeping. You could even take photos of the expenses and then use the time stamps as a reference.
Your records should entail every detail of your business. What are your expenses? How much do you spend on buying ingredients like potatoes, cooking oil, and salt?
Any money used to acquire the raw material should be added to the expenses column and added to the cost of the product, which will add up to the production cost.
You have to write as many details as possible concerning your business. This includes what you owe to suppliers and even the cost of minuscule ingredients like pepper. You’ll also need to keep records of utilities such as water, electricity bills, KRA returns, bank slips, rent, etc.
These records should be updated daily, monthly, and yearly.
How to Calculate Profit and Loss
Your record book should indicate your daily sales and the cost of crucial daily ingredients like potatoes, tomato sauce, delivery costs, chilli, onions, packing papers, etc.
Consider your targets, i.e., how much you mean to save per day. Then, add up all the expenses, less them from the total sales, and you will be able to know your daily profit.
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Then, sum the profits for a whole month and subtract the cost of utilities such as rent and electricity. You’ll get your monthly profit.
If your daily expenses exceed your daily margin, you are probably consuming your stock, and it would be best to reevaluate your strategy.
Bottom Line
Ngatia, our business consultant, sums up that the excuse of saying, “I don’t know where my money goes” is a lazy, crafty African excuse for escaping reality and accountability.
He says that any serious entrepreneur should keep records of money going out and money coming in. If more money is going out than money coming in, you are making a loss. You have a profit if you have something remaining after the money goes out.
Do you have a burning question on entrepreneurship or personal finances?
Email your questions to [email protected] or WhatsApp +254738198620 or +254722529685 and get advise from Bizna Club members and the wider Bizna audience.