List the steps in the process of profit planning for a small business.

Question

What will be an ideal response?

Answer 1

To achieve one's goal during a financial year, one needs to take the following profit-planning steps:

a) Establish a profit goal.
b) Determine the volume of sales revenue needed to make that profit.
c) Estimate the expenses one will incur in reaching that volume of sales.
d) Determine estimated profit, based on plans resulting from steps b) and c).
e) Compare the estimated profit with the profit goal.
If one is satisfied with the plans, one can stop at this point. However, one may want to check further to determine whether improvements can be made, particularly if one is not happy with the results of step e). Doing steps f) through j) may help one to understand better how changing some operations can affect profit.
f) List possible alternatives that can be used to improve profits.
g) Determine how expenses vary with changes in sales volume.
h) Determine how profits vary with changes in sales volume.
i) Analyze one's alternatives from a profit standpoint.
j) Select an alternative and implement the plan.