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Cash Rules: Learn & Manage the 7 Cash-Flow Drivers for Your Company's Success_6

Tham khảo tài liệu 'cash rules: learn & manage the 7 cash-flow drivers for your company's success_6', tài chính - ngân hàng, tài chính doanh nghiệp phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | CHAPTER SIX CASH RULES G Gross Margin First of the Fundamentals ROSS MARGIN IS SALES MINUS THE DIRECT COST OF the product or service which on the income statement is usually called cost of goods sold or cost of revenue. Sometimes in a straight service business though you might not use the same ter- minology you might list service-cost elements along with all the other operating-cost categories. Whenever possible though it is usually best to break out the specific cost of providing services separately from selling general and administrative SG A expenses. This is particularly important when there are meaningful distinctions in selling price and cost structure from one product service type or cost element to another. Gross margin in manufacturing wholesaling and retailing is a particularly critical point of focus. First of all it is what s available to cover all operating overhead financing costs and income taxes as well as any distribution to owners. It had better be sufficient. One way of helping to ensure sufficiency is to design your motivation and measurement systems so that they support the goal of maximizing gross-margin dollars. There is an old adage that says you get what you measure. If you measure sales volume as the primary determinant of marketing success and as the basis on which to set marketing-related budgets guess what Sales will probably go up. But actually increased sales volume isn t what you want. A higher 103 CHAPTER SIX CASH RULES Different products have different levels of margin. That reality needs to be reflected in product-management budgets as well as the commission and advertising plans. gross margin is what you really want. If everyone involved in your sales and marketing would internalize that lesson and focus on its implications for both profit and cash flow chances are you would get what you really want instead ofjust raw sales volume. Your managers should consider applying commission rates or ad-budget percentages against dollars of