Evaluation of the effectiveness of commercial transactions. What profitability should the contract have Calculation of profit on the transaction

09.03.2020

Our company is engaged in the distribution of food products that are supplied to the largest federal chains, more than a hundred regional chains, and are also sold through traditional retail. Over the past five years, implementation in federal networks doubled. Therefore, with the onset of the economic crisis, monitoring the financial results of working with this distribution channel required especially close attention.

A common indicator of the effectiveness of a contract concluded by a sales employee in most companies is the size of the total commercial terms (usually as a percentage of turnover), which the sales manager agreed with the client during the negotiation campaign, as well as the promotional budget (as a percentage or in absolute numbers). ). An assessment of how successful the negotiations were is made on the basis of a comparison:

or the total size of the commercial terms of the contract is compared with the "standard" working conditions established for this type of client by the company's internal regulations (commercial policy);
or a precedent comparison is made (it was possible to agree on commercial terms with retail chain A for 20% cheaper than with chain B with a comparable turnover).

After many markets entered a steep peak in 2015 and it became clear that their volatility is high, we came to the conclusion that the old approaches to assessing the effectiveness of contracts need to be changed. To do this, it was necessary to establish closer interaction between the financial services and the sales department.

Terms of delivery to each network are often worked out individually. It was obvious that it was necessary to tie key indicators the effectiveness of network account managers to the profitability of the contract that such a sales person enters into and manages. And just at that moment, the most interesting problem arose, which was to explain to sales managers all the features of calculating the rate of return on a contract through the prism of the company's management accounting according to IFRS. Many people in the sales department naturally didn't understand how a company determined such metrics as product cost, direct costs, general manufacturing costs, shipping costs, and personnel costs.

Essentially, the Contract Yield that salespeople now had to manage in order to raise a portion of their wages was something abstract and immeasurable to them. It took the finance department many hours of meetings, consultations and presentations to teach the sales department the required understanding of financial terms.

For example, we discussed for a long time with colleagues the approach to accounting for revenue in accordance with IFRS, which states that the fact of sale is taken into account only after the transfer of ownership of the shipped products to the buyer. And since the sales department employees took into account the revenue at the time of shipment of the goods from the company's warehouse, their understanding of the implementation of the plan and the real picture in the actual report could be very different. This happened, for example, when the products were sent in the last two or three days of the calendar month and did not have time to get to the client and become his property before the beginning of the next month.

With regard to contract costs, the understanding of their accounting began with a discussion of the difference between costs and payments. I had to explain to my colleagues that the money we pay to the client is not equal to our costs, at least for the amount of VAT (Figure 1).

Figure 1. Difference between P&L and Cash Flow reports

This difference arose even if a one-time payment was made trading network for promotional services, which covered their provision over the next few months (Figure 2).

Figure 2. The principle of accrual of costs for promotional services in the P&L report

But the most interesting thing began when we, through the joint efforts of the two services, tried to structure all the variety of forms of expenses under contracts according to their essence. Since each network client has its own approach to contracts and the provision of services, starting from the name of such services and ending with the approach to calculating costs and payments, they differed greatly in different networks. Thanks to joint work we were able to streamline all expenses into four simple groups and agreed on an approach to spreading them.

The contract revenue and expense figures discussed above are fully managed by the sales department. Moving further down the P&L report, we came to a cost figure that depends on many factors that the sales department manages only indirectly by rotating the assortment in networks to higher margin SKUs.

The next indicators that affect the target profitability of the contract are the cost of personnel, the delivery of products to customers, and merchandising. Since all sellers have been able to calculate their salaries and other compensations for a long time, there were no difficulties with these indicators.

The efficiency of transport costs can also be managed by a sales employee by increasing the capacity of machines and optimizing the schedule or geography of deliveries.

What do we have as a result of the work done?

A motivated sales team that understands how to influence the profitability of a contract for each of its clients, which, on a par with financial controllers, can analyze all the subtleties of concluded contracts and, at the same time, can communicate with each other in one understandable language financial service companies.

Clear and transparent financial instrument to measure the performance of both the company's sales department and to understand the results of working with each client (P&L report in Figure 3).

Figure 3. Structure of a traditional P&L form

Three simple steps were taken to achieve this result:

The variable part of the payroll for sales department employees was tied to the profitability of the contract.
An employee was allocated in the financial department, who is a connecting and coordinating link, a kind of translator from the language of the sales department employees into the language of financiers (and vice versa). This made it possible to achieve an adequate understanding of the numbers, concepts and methodology of itemized segmentation that both divisions operate with.
The sales team was involved in the planning and control of actual revenues and service charges billed by customers.

Analysis of the effectiveness of the organization's activities is impossible without taking into account profitability indicators. An indicator that characterizes the profitability of an activity or, in other words, economic efficiency This is the concept of profitability.

This parameter demonstrates how efficiently the company uses the available economic, labor, financial and natural resources.

For non-profit structures, profitability is the main indicator of work efficiency, and in commercial divisions, quantitative characteristics calculated with greater accuracy are important.

Therefore, there are many types of profitability: profitability of production, profitability of products, profitability of assets, etc.

But, in general terms, these indicators can be compared with efficiency indicators, the ratio between the costs incurred and the resulting profit (the ratio of costs to income). A business that brings profit according to the results of reporting periods is profitable.

Profitability indicators are necessary for the implementation financial analysis activities, identifying weaknesses, planning and implementation of measures to increase production efficiency.

The types of profitability are divided into those based on the cost approach, the resource approach or the approach that characterizes the profitability of sales.

Different types of profitability calculation pursue their own goals and use many different accounting indicators (net profit, production cost, commercial or management expenses, profit from sales, etc.).

Profitability of the main activity.

Refers to cost indicators, characterizes the effectiveness of not only the main activities of the company, but also work related to the sale of products. Allows you to evaluate the amount of profit received per 1 ruble spent.

This takes into account the costs associated with the direct production and sale of core products.

It is calculated as the ratio between the profit from sales and the sum of the cost of production, which includes:

the cost of sold goods, works, products or services;
cost of business expenses;
cost of management expenses.

It characterizes the organization's ability to independently cover costs with profit. The calculation of the profitability of an enterprise is used to assess the effectiveness of its work and is calculated by the formula:

Genus = Prp / Z,
Where Z - costs, and Prp - profit received from the sale.

The calculation does not take into account the time elapsed between production and sale.

Return on current assets.

The profitability of current (in other words - mobile, current) assets shows the profit received by the organization from each ruble invested in current assets and reflects the efficiency of using these assets.

Defined as the ratio between net income (i.e. remaining after tax) and current assets. This indicator is intended to reflect the organization's ability to generate a sufficient amount of profit in relation to the current assets used.

The higher this value, the more efficiently working capital is used.

Calculated according to the formula:

Ptot = Chp / Oa, where

Рtot is the total profitability, net profit is Np, and Oa is the cost of current assets.

Internal rate of return.

The criterion used to calculate the effectiveness of an investment. This indicator allows you to evaluate the feasibility of investing in investment projects and shows a certain discount rate at which the net worth of funds expected in the future will be equal to zero.

This is understood as the minimum rate of return, when the investment project under study assumes that the desired minimum rate of return or the company's cost of capital will exceed a smaller indicator of internal profitability.

This calculation method is not very simple and is associated with careful calculations. In this case, inaccuracies made during the calculation can lead to the final incorrect results.

Moreover, when considering investment projects Other factors are taken into account, for example, gross margin. But it is on the basis of the calculation of the internal rate of return that the enterprise makes decisions of an investment nature.

Profitability of fixed assets.

The presence of profit, as an absolute indicator, does not always allow you to get a complete picture of the efficiency of the enterprise. For more accurate conclusions, relative indicators are analyzed, showing the effectiveness of specific resources.

The process of work of some enterprises depends on certain fixed assets, therefore, for a general increase in the efficiency of activities, it is necessary to calculate the profitability of fixed assets.

The calculation is carried out according to the formula:

Ros \u003d Chp / Os, where

Ros - profitability of fixed assets, Np - net profit, Os - cost of fixed assets.

This indicator allows you to get an idea of what part of the net profit falls on the unit cost of fixed assets of the organization.

Calculation of profitability of sales.

An indicator that reflects net profit in total revenue demonstrates the financial performance of the activity. The financial result in the calculations can be various indicators of profit, this leads to the existence of several variations of the indicator. Most often these are: profitability of sales in terms of gross profit, net profit and operating profitability.

Formulas for calculating the profitability of sales.

According to gross profit: Rpvp = Bp / B, where Bp is gross profit, and B is revenue.

Gross profit is the difference between sales revenue and cost of sales.

For net profit: Rnp = Np / V, where Np is net profit, and B is revenue.
Operating margin: Op = EBIT/B, where EBIT is profit before taxes and deductions, and B is revenue.

The optimal value of the profitability of sales depends on the industry and other characteristics of the enterprise.

So in organizations that use a long production cycle, such profitability will be higher than those companies that work with a high turnover, although their efficiency may be the same.

Sales efficiency can also show the profitability of products sold, although it takes into account other factors.

Threshold of profitability.

It also has other names: critical volume of production or sales, critical point, break-even point. Denotes this level business activity organization in which total costs and total revenues are equal to each other. Allows you to determine the margin of financial strength of the organization.

Calculated by the following formula:

Pr \u003d Zp / Kvm, where

Pr - profitability threshold, Zp - fixed costs, and Kvm - gross margin ratio.

In turn, the gross margin ratio is calculated by another formula:

Vm = V - Zpr, where Vm is the gross margin, V is revenue, and Zpr is variable costs,
Kvm \u003d Vm / V.

The company incurs losses when the sales volume is below the profitability threshold and makes a profit if this indicator is above the threshold. It is worth noting that with an increase in sales, fixed costs per unit of production decrease, while variables remain the same. The profitability threshold can also be calculated for certain types services or products.

Cost-effectiveness.

It characterizes the payback of the funds spent on production, shows the profit received from each ruble invested in production and sale. Used to evaluate the effectiveness of spending.

It is calculated as the ratio between the amount of profit and the amount of expenses that brought this profit. Such expenses are considered decapitalized, written off from the balance sheet asset, presented in the report.

The cost-benefit ratio is calculated as follows:

Rz = P/Dr, where P is profit and Dr is decapitalized expenses.

It should be noted that the calculation of cost-effectiveness indicators demonstrates only the degree of return on costs spent on specific areas, but does not reflect the return on invested resources. This task is performed by indicators of profitability of assets.

Factor analysis of profitability.

It is one of the parts of financial analysis and, in turn, is divided into several models, of which additive, multiplicative and multiple are most often used.

The essence of building such models is the creation of a mathematical relationship between all the studied factors.

Additive ones are used in cases where the indicator will be obtained as a difference or sum of the resulting factors, multiplicative - as their product, and multiple - when the factors are divided into each other to obtain the result.

Combinations of these models give combined or mixed models. For a full-fledged factorial analysis of profitability, multifactorial models are created that use various profitability indicators.

Before signing a contract for the supply of goods or services, you need to check whether it is beneficial for you? What profit will you get from this? Will the deal be profitable?

Let's try together to figure out what is called profitability, how to calculate it.

Economic term - profitability

Any businessman starts work not for charitable purposes, but for profit. In order not to work at a loss, it is necessary at the very first stage to calculate investments in production, the desired percentage of profit. At the same time, it is important that the selling price does not go beyond a certain upper limit, if it is not an exclusive. Otherwise, it will be very difficult for someone to sell the objects of their labor.

In this article, we will not consider all existing economic indicators. We will devote time and attention only to profitability.

Profitability is an indicator that determines the overall efficiency of the enterprise, taking into account the type of activity and other factors. On the basis of this indicator, it is possible to draw conclusions about whether the enterprise effectively uses what is at its disposal: money, materials, personnel, etc. Profitability determines how the profit received correlates with expenses.

If the analysis shows that the company has made a profit in the past time interval, its activity can be called profitable. At the same time, one transaction or project can become profitable, while the overall activity can be profitable.

Let us consider in more detail the types of profitability and determine how to calculate it if there is a desire to participate in auctions and tenders.

Profitability and its types

It is important to emphasize that profitability cannot be exactly the same for a barbershop and a steel plant. The type of activity completely determines the efficiency of work. Even formulas for calculation can be used different.

There are the following types of the desired economic indicator:

Current and non-current assets. Allows you to determine how much the company raises funds per each ruble. For calculation, profit before tax is deducted and the value of assets at the disposal of the enterprise are compared.
Goods produced or services rendered. Allows you to draw conclusions about how profitable the production of both an individual product and the entire range. To calculate the profitability, it is enough to divide the profit by the costs incurred in the production process.
production. Based on this indicator, it is possible to draw conclusions about whether it makes sense to engage in a particular type of activity. All profits and all costs incurred are taken into account. The higher this indicator, the better for the enterprise. It can be improved by reducing the cost, improving quality, switching to more advanced technologies.
Deals. Primarily interested in those who participate in the auction. But only mathematical values and formulas for the calculation are not enough. You can get a complete picture if you take into account the possible risks inherent in this type of activity.

In fact, there are a lot of types of profitability. It is not possible to consider everything within the framework of one article.

How to calculate profitability in practice?

Earlier, we have already determined that when determining the effect of it is best to take as a basis not the profitability of production as a whole, but the profitability of the transaction. But it is important to consider that the numbers will show only mathematical values. At the same time, it is also necessary to take into account the moral aspect. The customer may be dishonest, not pay within the agreed time. In the country during the execution of contractual obligations, the economic situation may change, another economic crisis may occur.

It is impossible to say exactly at what level the profitability should be, if we are talking about even one transaction. In Europe, a profit of 6% is considered exorbitant. In Russia, even 20% of profits per year will be eaten away by inflation. This is especially true for long-term projects. Many believe that at a minimum, you need to get more from a transaction than from a standard bank deposit. If the bank offers 10%, and you expect to receive no more than 8% from the contract, and even in an unclear perspective, it is better to entrust your hard-earned money to financiers. Less headaches and more profit.

It remains to find out in practice how profitability is calculated.

An example of calculating the profitability from participation in the auction

The buyer placed an order for the purchase of refrigerators. He needs 100 pieces. Volume, characteristics are not taken into account. It is assumed that the starting price of the lot is 5.2 million rubles. You cannot lower the price below 4.6 million rubles. At the same time, you pay the manufacturer 36 thousand rubles for each unit. Accordingly, 3.6 million rubles are your direct expenses. Among other conditions:

you do not pay for shipping;
you will have to pay tax on the simplified tax system (income-expenses) at a rate of 13%.

Based on these data, and will have to calculate the profitability of this transaction.

The desired value is obtained by the formula:

R=(Pr/Vir)*100%,

where R - profitability

Pr - received profit,

Vir - proceeds from the transaction.

It is necessary to explain what is meant by profit and what is meant by revenue.

Revenue is understood as the entire amount of money that will go to the contractor's account following the results of the execution of the contract. In this case, the revenue will be 1 million rubles (4600,000-3600,000).

If we talk about profit, then from the revenue it is necessary to subtract expenses (delivery, production, wage personnel, etc.). In this transaction, the profit will be equal to 852.5 thousand rubles (1,000,000 - 113,000 (tax) - 4,500 (telephone costs) - 30,000 (loaders' wages)).

It is important to understand that this figure may change due to market conditions and other reasons. Approximately 10% of the proceeds should be included in expenses. Accordingly, according to calculations, the profit from this transaction should amount to 752.5 thousand rubles.

Based on the data obtained, profitability can be calculated:

(852,500 (profit) / 1,000,000 (revenue))*100% = 82%

In 2018, banks accept money for deposits at a rate of 6 to 8%. Based on this point of view, the transaction will be cost-effective and beneficial for the contractor.

Profitability is calculated in a similar way for other prices, another minimum contract value. Many experts say that it is necessary to calculate not only profitability, but also the price to which you can drop in the auction, but at the same time remain profitable.

In this article, we looked at how to calculate profitability from. Costs may be added, the profit calculation scheme is often more complicated than we have indicated. But the general meaning does not change. Do not neglect preliminary calculations if you want to make a profit at the end of the auction, not tears.

To assess the value of a trade transaction for the company's activities, it is necessary to determine its effectiveness. In this case, one should take into account the characteristics of the transaction - profitability, profitability, duration, payment terms, etc., as well as the risks affecting the implementation of the transaction. The author of the article proposes his own methodology for evaluating the effectiveness of trade transactions, which he uses in practice.

Managers of the commercial department of I.S.P.A.-Engineering are engaged not only in finding new customers and concluding contracts, but also in analyzing planned commercial transactions. To do this, they need to clearly answer the questions: “Why should I enter into or reject the deal in question? What profit will it bring to the company? The same principle is used by the company to decide whether to participate in tenders for the supply and installation of equipment.

The company's financiers have developed and implemented a methodology for a comprehensive assessment of the effectiveness of planned trade transactions, which allows you to choose the most attractive from a large number of proposed transactions. At the same time, one important nuance must be immediately stipulated. The method is designed to evaluate transactions that require the diversion of their own working capital company, since it is assumed that the company operates in a competitive market and cannot insist on 100% upfront payment. Therefore, fully prepaid transactions should be treated as an exception and analyzed separately.

The methodology developed by I.S.P.A.-Engineering allows for a comprehensive assessment of a trade transaction and reduces all its characteristics to one integral indicator - the rank of the transaction. To determine the rank, you need to calculate the following indicators - the profitability of the transaction, the risk-adjusted profitability, the significance of the transaction and its prospects.

Trade profitability

The profitability of a trade transaction is an indicator that characterizes the amount of profit received by an enterprise for one ruble of its own funds diverted from turnover for the implementation of this transaction. The yield calculation algorithm depends on the type of trade deal.

All trading transactions can be divided into one-time, recurring and continuous.

Under one-time deal the acquisition and subsequent sale of one batch of goods is implied. Recurring deal- this is the purchase from one supplier of a limited number of batches of one product and their subsequent sale. And finally, to continuous transactions includes periodic purchases and sales of one product over an indefinite period of time. As a rule, when concluding continuous transactions, the contract indicates the amount within which the seller undertakes to ship products (perform work, provide services). Goods under such a contract are delivered as needed and are documented in the relevant annexes to the contract.

Evaluation of the profitability of one-time and recurring transactions

The profitability of one-time and recurring transactions is calculated on the basis of commodity-payment budgets, which are schedules for the execution of operations within the framework of a trade transaction. From these budgets, the company receives complete information about the timing of the transaction, the amounts of receipts and payments, as well as the amount of funds allocated to finance the trade transaction. Let's look at an example of how commodity-payment budgets are compiled.

Example 1 2
Trade-M supplies audio and video equipment. It is planned to conclude a supply contract with the manufacturer of audio equipment Media-Images. This company undertakes to supply Trade-M sound I/O cards, which will be sold by CJSC Stratos. The contract with the Stratos company was concluded on the terms of a 30% prepayment. The remaining 70% payment will be received within 10 working days after delivery. In turn, Media-Images requires full prepayment from Trade-M.

Transport services, warehouse processing services and insurance services paid upon delivery. The volume of the purchased batch is 600 boards at a price of 3500 US dollars per piece. The batch will be sold by CJSC Stratos at a price of USD 5,042 per piece. The commodity-payment budget of the planned transaction, compiled by Trade-M managers, is presented in Table. one.

Based on the data contained in the commodity-payment budget, it is possible to calculate the profitability of the planned transaction (D) using the following formula:

where Pr - profit from the implementation of the transaction;
Co - the weighted average amount of diverted working capital;
Wed - the term of the transaction.

The first multiplier in this formula shows how much profit the company receives for each ruble of its own working capital, aimed at the implementation of a trade transaction. The second multiplier allows you to bring transactions with different durations to one period - a month. At the same time, the term for the implementation of the transaction in the framework of the described methodology is the period between the dates of the first withdrawal of own funds and the final settlement with the buyer under this transaction.

Example 2
Let's use the conditions of the first example. Based on the data from the commodity-payment budget, we calculate the weighted average amount of distraction:

(1,192,440 x 14 + 1,233,854.46 x 1 + 1,249,778.03 x 10 + 1,253,978.03 x 3 + 1,311,157.19 x 8): 36 = $1,241,027.4

Now let's determine the profitability of the analyzed transaction (see Table 2).

Evaluation of profitability of continuous transactions

Continuous transactions, unlike one-time and recurring ones, are characterized by a significant duration, so their detailed planning, as well as determining profitability using commodity-payment budgets, is rather difficult.

In the company "I.S.P.A.-Engineering", the evaluation of the profitability of continuous trading transactions is based on data analysis trade balance.

The trade balance includes actual and planned indicators of commodity balances, receivables and payables for equal periods of time (month, quarter, year). According to the author, the following ratio of actual and planned indicators allows obtaining the greatest accuracy: actual data for three or four periods and planned data for one period. If there are no actual data for a continuous trade transaction for any period or a significant change in its parameters is expected, the trade balance can be drawn up only on the basis of planned indicators.

The profitability of continuous trading transactions (D) is calculated by the formula:

where P - profitability (ratio of average monthly profit to average monthly revenue);
P - the period of turnover of diverted funds (the ratio of the average monthly amount of diversion to the average monthly revenue).

Example 3
In March 2003, Trade-M entered into an agreement for the supply of stereo kits (a portable tool for creating realistic stereo recordings) produced by Coliseum for distribution through the Phaeton dealer network. Actual data on the results of this transaction for four months, as well as planned indicators for the first day of the next month, are presented in the trade balance (see Table 3).

The average profitability of the transaction, calculated according to internal management reports, was 14.9%, and the average monthly revenue was $853,658. Based on these data and the trade balance, the profitability of the specified trade transaction is calculated (see Table 4).

Reference

When determining the yield using the methods described above, you should pay attention to the following. Calculating the profitability of continuous transactions, by "distracted from circulation" the author means funds frozen in the form commodity balance and accounts receivable. It should be noted that accounts receivable include trade margin and hence the profit of the company. When evaluating the profitability of one-time and recurring transactions, abstract funds do not contain a trading margin. Therefore, if a company sets a large trading margin, then for a more accurate assessment of such transactions, it is advisable for managers to exclude the company's profit from receivables when calculating profitability. With a small margin or a small share of receivables in total amount abstracted funds, such an adjustment can not be made. So, in example 3 (profitability - 14.9%), with the exclusion of profit from the amount of receivables, the profitability of the transaction will increase by less than 0.5% (from 8.47 to 8.76%).

(Help prepared by the editors " CFO».)

Note that all of the above approaches to calculating returns were based on the assumption that contractual obligations under the planned transactions would be strictly observed. However, in practice this is not always possible, therefore, when calculating the profitability, it is necessary to take into account the risks to which any commercial activity is exposed.

Estimating risk-adjusted returns

The risk of growth in direct costs, that is, the likelihood of an increase in the cost of purchasing goods if it is impossible to terminate the transaction. For example, in a perpetual contract between a trading company and a supplier, it is stipulated that deliveries are made at exchange prices. The contract with the buyer for a specific transaction is concluded for the supply of goods at a strictly agreed price. In the event of a jump in stock prices in the period after the conclusion of the contract with the buyer and before the purchase of goods from the supplier, the company will incur losses from the transaction.
The risk of rising associated costs, that is, the possibility of increasing the cost of services of forwarders, transport services and other costs associated with the transaction.
The risk arising from the fault of the partner-buyer, that is, the possibility of full or partial non-payment by the buyer of the delivered goods.
The risk arising from the fault of the seller partner, that is, the possibility of losing the advance funds if the seller does not deliver the goods.
Risk of extension delivery of goods, that is, the possibility of increasing the period of diversion of working capital through the fault of the seller, sales agents, carriers and other parties involved in the transaction.
The risk of an increase in the period for receipt of funds after the delivery of goods, that is, the possibility of increasing the period of diversion of working capital through the fault of the final buyer.
The risk of a decrease in revenue, that is, the possibility of falling prices for goods. For example, the buyer refused to purchase goods and the products had to be sold at a price lower than planned.
insurance risk, that is, the possibility of loss of goods (or loss of funds as a result of damage to goods) through no fault of the partners (buyer and seller) (for example, the risk of damage to goods during transportation).

Personal experience
Daniel Panin, Head of the Financial and Economic Department of the Department of Branches of CJSC Apteka Holding (Moscow) 4

The main risk in trading transactions with deferred payment is the “freezing” of money as a result of the fact that the client assumes obligations that he does not subsequently fulfill. There is an overdue receivable, that is, the money is withdrawn from circulation and instead of profit, they bring a loss.

Many of the risks listed above can be avoided if the appropriate conditions are correctly written in the contract.

To calculate the risk-adjusted return, it is necessary to evaluate the possible deviations of the transaction parameters from their planned values. As a rule, this is done by the manager responsible for the transaction, or the risk manager of the company 5 .

Example 4
Let's adjust the risk-adjusted return for the Media-Images - Stratos deal discussed in example 1. The risk manager determined that this deal is subject to the risk of growth in direct costs and the risk due to the fault of the seller partner.

The risk manager assessed the risk of growth in direct costs as follows:
- with a probability of 80%, direct costs will remain unchanged (amount to 2100 thousand US dollars);
- with a probability of 10% - will grow by 10% (2310 thousand US dollars);
- with a probability of 5% - will increase by 25% (2625 thousand US dollars);
- with a probability of 5% - will increase by 50% (3150 thousand US dollars).
Thus, the expected costs of this transaction, taking into account the risk of growth in direct costs, will be 2199.75 thousand USD(2100k x 0.8 + 2310k x 0.1 + 2625k x 0.05 + 3150k x 0.05).

The risk manager also assessed the risk due to the fault of the seller partner:
- with a probability of 90%, the advanced funds will not be lost;
- with a probability of 7%, 25% of the amount of the advance payment (525 thousand US dollars) will be lost;
- with a probability of 2%, 50% of the amount of the advance payment (1050 thousand US dollars) will be lost;
- with a probability of 1%, 75% of the amount of the advance payment (1575 thousand US dollars) will be lost.
The expected increase in direct costs as a result of the loss of advanced funds will be 73.5 thousand USD(0 + 525 thousand x 0.07 + 1050 thousand x 0.02 + 1575 thousand x 0.01).

Consequently, the amount of costs required to purchase goods, taking into account the considered risks, will be 2273.25 thousand USD(2199.75 thousand + 73.5 thousand).

The risk-adjusted return is calculated in exactly the same way as the return in example 1, only the cost of the goods is now assumed to be 2273.25 thousand US dollars, so the risk-adjusted return will be 28.5% (recall that without risk, the return on the transaction amounted to 43.8%).

In some cases, the adjustment of performance indicators taking into account risk factors may not be carried out. So, there is no need to assess the risks of transactions with suppliers and buyers in which the company is confident (that is, for the entire time of working with these companies, they have never violated their obligations).

Assessment of the significance and prospects of trade transactions

In addition to the “profitability” and “risk-adjusted profitability” indicators, in order to rank trade transactions, it is also necessary to determine the prospects and significance of each transaction.

The prospect of a transaction is defined as specific gravity prospective profit on this transaction in the sum of all future profits of the company. Prospective refers to the profit that can be obtained from recurring and continuous transactions as a result of their further development. For example, it is assumed that in case of successful completion of such a transaction, the buyer will become a regular customer of the company. For one-time transactions, the prospective profit cannot be obtained, therefore it is assumed to be equal to zero.

The significance of a transaction is defined as the ratio of the expected average monthly profit on recurring and continuous transactions to the total average monthly profit of the company. For one-time transactions, significance is the ratio of the planned profit on this transaction to the total expected profit of the company in the month when this transaction should take place.

Ranking of planned trade deals

To compare various trade transactions and evaluate them, the rank of the transaction (R) is determined, which is an integral characteristic that takes into account the four indicators calculated above: profitability, risk-adjusted profitability, significance and prospects. In fact, the deal rank is the sum of the squared deviations of these indicators from the maximum values and is calculated by the formula:

where Xok is the value of the k-th indicator of the transaction being evaluated;
Xmk - the maximum value of the k-th indicator;
k - type of indicator (profitability, risk-adjusted profitability, significance, prospects).

The lower the deal rank value, the more attractive the planned deal.

Example 5
Let's determine the rank of the Media-Images deal - Stratos. In the previous examples, we have already calculated two of the four metrics used to calculate trade rank: return (43.8%) and risk-adjusted return (28.5%).

Let Trade-M have five more trades scheduled next month. The characteristics of these transactions, the calculation of indicators - the prospects, significance and rank of the Media-Images - Stratos transaction we are analyzing, as well as other planned transactions, are presented in Table. 5.

As you can see, the trade deal Media-Images - Stratos has the lowest rank, that is, it is the most attractive of all the planned deals.

The methodology described above can be easily adapted to the specific conditions in which a trading company operates. Companies that decide to implement the above principles based on the specifics of their business can independently establish a list of those indicators that will be used in determining the rank of a transaction. If some indicators are more significant for the company (for example, profitability is more important and prospects are less important), then when calculating the rank, the weight of each indicator used can be taken into account.

One of the advantages of this method is that it is easy to implement: it is enough to create several related tables in Excel once, and then simply enter the corresponding data there. The second plus of the technique is its flexibility, as already mentioned above.

Personal experience
Nelya Sadilova, Financial Director of CJSC "Company" Evan "(Nizhny Novgorod)

To rank deals, our company has implemented an integrated approach. The commercial department gives a score that characterizes the possibilities effective work with a partner. Under the transaction, the expected gross income and profitability are calculated, the prospects of the transaction are assessed (the possibility of concluding long-term contracts is implied). Based on a comprehensive assessment of the listed indicators, a decision is made to conclude a transaction.

Note that it is also necessary to identify transactions for which a comprehensive assessment is inappropriate. For example, it is known that trading companies often enter into a significant number of trade transactions for small amounts. In this case, the labor costs for detailed planning and evaluation of the effectiveness of a trade transaction will not pay off. In addition, when selecting trade transactions, in addition to their ratings limiting factors should be taken into account, such as the availability of free cash at the disposal of the company, warehouse space, etc.

So, if you take into account all the nuances of your company, then using this technique will allow you to carefully evaluate the effectiveness of trade transactions. Expert opinions

Andrey Rekshinsky, Senior Consultant, Financial and Management Consulting Department, FBK (Moscow)

The method proposed in the article is certainly interesting and useful. One of its obvious advantages is an assessment of the efficiency of using the capital invested in a transaction. However, the described calculations are possible when the company can plan the transaction: it knows the supplier and the buyer, the terms of delivery and the payment procedure. Thus, it is advisable to apply this technique trading companies, whose activities are mainly associated with a small volume of trade transactions for significant amounts.

In addition to the described methodology, the following can be added. If a company uses bank loans in some transactions, then taking into account the cost of servicing the loan when determining the profitability of the transaction can give a more accurate result than calculating the profitability using the formula proposed by the author. To do this, the profit from the implementation of the transaction must be reduced by the amount of the planned costs of the loan.

I would also like to note that when constructing a general schedule of planned payments for all transactions made, the actual term for the withdrawal of working capital may differ from the period laid down when planning the transaction, since in practice the company usually reserves funds for payment in advance. For example, three days before making payment to the supplier, the required amount is accumulated on the company's account. In this case, the actual period of withdrawal of working capital will be three days longer than the period reflected in the commodity-payment budget.

In my opinion, the proposed method of ranking deals can only be applied to standard contracts with regular customers. If the transaction is concluded with a new client and in the future may entail a series of profitable contracts, then it is recommended to separate such an operation from the general list and consider it as a separate investment project.

After the most efficient transactions have been selected, a situation may arise when there is an excess of payment means in the company's single payment schedule. That is, the funds received on the account of the company and are on it for a certain period of time. To improve efficiency, it is possible to analyze the possibility of changing the conditions (terms, volumes) of transactions with low priority so that they can “fit” into the overall structure cash flow. Indirectly, this will increase the efficiency of other transactions by reducing the reserved amounts on the account.

Evgeny Tukpetov, financial analyst at Optima (Moscow)

The described method is of particular interest for trading firms. Its main advantage is that it offers a way to systematize various indicators to determine the effectiveness.

The author gives his own interpretation of the term "yield", different from the classical one (compare it, for example, with the concept of "yield of securities"). Those who are confused by the author's interpretation can be advised to determine financial results transactions using the classical method of discounting cash flows.

The methodology raises an important problem - taking into account risks when planning transactions. The assessment of current risks is very well developed. However, it is not clear how the author proposes to take into account prospective risks when determining the indicator "prospect".

A few words should also be said about the calculation of the final indicator of the proposed methodology - the "deal rank". Since when determining the deviations of the calculated indicators from the maximum values, only positive values are obtained, it is obvious that squaring these deviations reflects the attitude of the author of the article to risk. With this calculation, transactions where one of the parameters has a large deviation will be characterized by a higher rank value compared to transactions with average deviations in several parameters. If, when calculating the rank, the sum of deviations is raised to the first power, then the opposite result can be obtained (this statement is true, for example, for two transactions: for one, all deviations are 0.3, for the other, deviations for three indicators are 0.1, and for one - 0.8). Thus, if a company that will apply the described methodology has a different attitude to risk than the author, then when calculating the rank, it can use not the squared deviations, but a different degree.

When making decisions about choosing a deal based on the proposed method, it is important to remember: in this method does not take into account the use of non-monetary resources of the company and the intrinsic value of its operations. For example, if one transaction requires two managers and one working day, and another requires the work of three departments for a month, but the second transaction has a slightly higher rank, then which of these transactions is preferable? It seems to me that this problem can be solved by taking into account, when determining the rank, another indicator that would characterize the intrinsic value of the transaction. In addition, when deciding on the appropriateness of a particular transaction based on the calculated rank, one should not forget that conducting a transaction with a lower rank, which “eats up” all resources and does not allow the company to carry out other transactions, can sometimes be less profitable, than the joint implementation of several transactions that require fewer resources.

In conclusion, I note that, in my opinion, the method can be improved from the point of view of the calculation technique. It is advisable to simplify the formula for calculating the profitability of continuous transactions. The economic meaning of the ratio of profitability to the period of turnover of abstract funds is not entirely clear at first glance. Both indicators contain the average monthly revenue, reducing which both in the numerator and in the denominator, we will get a simple and understandable fraction from an economic point of view, where the average monthly profit will remain in the numerator, and the average monthly amount of working capital diversion will remain in the denominator.

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1 A trade transaction in this article means a set of purchase transactions from sole supplier of the same product and its exchange or sale to a buyer (or multiple buyers).
2 The data of the commodity-payment budget compiled for actually concluded transactions are a commercial secret of the enterprise, therefore, hereinafter, the methodology for a comprehensive assessment of the effectiveness of planned trade transactions is considered on conditional examples. - Note. editions.
3 For more information on risk classification, see the article “How to manage risks” Note. editions.
4 Not currently employed by the company.
5 For more information on risk management, see How to Manage Risk, CFO, 2003, No. 9. – Note. editions.

Business, whatever it may be, requires costs. Entrepreneur investing in new project, expects a return in the form of high profits and its constant growth. To evaluate the efficiency of investments, the profitability of the business is calculated. What it gives and how it is determined, we will tell in the article.

The need to calculate the profitability of each entrepreneur determines for himself. Large companies employ an economist whose duties include regular calculation of performance and planning further work taking into account the obtained values. In addition to the overall profitability, for this purpose, the net return on assets, profitability of fixed assets, investments, sales, personnel, equity and other ratios.

How is profitability determined?

Calculating the profitability of a business is not so difficult if ready-made financial statements are at hand. For individual entrepreneurs, who do not keep accounting records or are just planning to open their own business, will have to reduce everything “by eye”. Profitability is calculated mainly as a percentage. The calculation formula is as follows:

Profitability of production \u003d (Profit balance / Costs of production and sales) x 100

Such a calculation will allow you to determine how much profit before taxes falls on 1 ruble of funds spent. For convenience, you can pick up a convenient online calculator online or download a special program. On average, the normal coefficient is 15-35%, but it is highly dependent on the specifics commercial activities. For retail 10-15% is a decent result, but for the beauty industry or construction, this figure will be small. For these areas, it is necessary to proceed from 50-100%, for legal services, trade in intangible assets - from 100%.

The specified calculation shows the nominal value of profitability. There is also a real profitability - the one that is determined taking into account inflation. To assess the purchasing power of the enterprise. When the indicator turns out to be low or even negative, this indicates a lack of performance and impending bankruptcy. A business with a high profitability is considered promising, fully getting a return on investment.

Factors affecting the level of profitability

Since profitability is a relative indicator, its value largely depends on the company's internal changes and external market conditions. The main ones are:

Labor productivity.
Technical moments in production.
Fluctuating prices for resources purchased by the enterprise, materials, third-party services, labor.
Changing the range and prices of products sold due to changing demand, crisis.
Seasonality, temporary equipment downtime or defective products.

The level of profitability can be increased by accelerating the turnover, reducing costs, rationally increasing prices. In any case, to stabilize the situation, it is necessary to calculate and take into account a number of other economic indicators and moments: labor productivity, product quality, the situation with competitors.

Profitability calculation example

For a better understanding, we will show a simple example of calculating the level of profitability using the above formula.

Initial data:

Total expenses (purchase of raw materials, wages, rent, materials for work, fuel and lubricants, etc.) - 18 million rubles.
Total income (revenue) - 22 million rubles.

To begin with, let's calculate the profit: income - expenses = 4 million rubles.

Profitability \u003d (4 million rubles / 18 million rubles) x 100 \u003d 22.2%

The calculation can be made for the month, year, quarter. For convenience, profitability is often considered separately for each type of product or production department.

It is important to compare indicators in dynamics, to take measures to improve them. Also, the return on capital, personnel, assets and other things is calculated separately. Economic analysis must be taken seriously. This is an opportunity to find out the weaknesses of the company and improve its overall profitability.