1. Close the month in three days
In the first three business days, gather the month's invoices by category, POS net sales, card fees from the processor statement, the payroll report, and every recurring charge from the bank and card statements. If you count inventory on the last day, cost of goods is opening stock plus purchases minus closing stock. If not, purchases will do.
2. One page, in the same order
Sales, cost of goods, labor, occupancy (rent and utilities), then operating (card fees, software and the rest), each line in dollars and as a percent of sales. Owner draw and loan payments sit below the line, so net operating income compares month to month. The sample shop's September:
| Line | September | % of sales |
|---|---|---|
| Net sales | $49,200 | 100% |
| Cost of goods | $13,450 | 27.3% |
| Labor | $16,100 | 32.7% |
| Occupancy | $6,500 | 13.2% |
| Operating | $3,380 | 6.9% |
| Net operating income | $9,770 | 19.9% |
| Owner draw and debt service | $5,650 | 11.5% |
| Cash left after draw and debt | $4,120 | 8.4% |
3. Read the five ratios first
| Ratio | Target | September |
|---|---|---|
| Prime cost (goods plus labor) | 60% or under | 60.1% |
| Labor | 32% or under | 32.7% |
| Cost of goods | 30% or under | 27.3% |
| Occupancy | 12% or under | 13.2% |
| Net operating margin | 15% or over | 19.9% |
These are the kit's monthly targets. Monthly labor counts all of payroll, salaried pay included, and its target is 32%, not the 28% used to price a schedule. Three are red: prime cost, labor and occupancy.
4. Three reds are not three problems
Cost of goods is under target, so prime cost is a labor problem. Labor is 0.7 points over: $356 for the month, about 20 hours. Occupancy moves only with more sales or a new lease: $6,500 a month reaches 12 percent at about $54,200 in sales.
5. Write down one thing
One decision a month, written on the page. September's: the Tuesday and Wednesday afternoon shifts go to one person from 2 to close. Print the page, date it and file it behind last month.
6. Watch the trend
A ratio that is red two months in a row is a decision, not weather. The sample shop's labor ran 33.5, 33.0 and 32.7 percent from July to September: better each month, still red. The month is easier to read when every week has been read. Our guide to the 15-minute Monday review shows how.
The kit's Monthly workbook builds this page from one column of inputs a month, shows the five ratios red or green against your targets, and keeps a twelve-month trend. It is part of the Tillwhistle kit, $97 once.