What's Your Profit?
- Direct Cost
- Indirect Cost
- Direct Cost
- Indirect Cost
Get Your Instant Analysis
How well is your company doing? Does your gut tell you that your localization company could perform better, but you cannot put your finger on it? Even worse, are there hidden time bombs that may go off in the future?
You can now get answers and clarity by entering eight data points from your financial documents into the LSP Health Meter. It can tell you how well you manage your vendors, how productive your project managers are, how well your clients pay you – and if you are likely to run out of cash, soon.
But mostly, it will enable you to look in the right places where you can fine tune your business for better financial and operating success.
After entering your data, your LSP Health Meter will produce clear text guidance as well as the data analysis behind it.
Number of calendar days for this analysis
Number of days for which you want to analyze your financial performance. Use 365 days for a year (366 for a leap year). Use 90 days for calendar year Q1 (91 for a leap year), 91 days for Q2, 92 days for Q3, and 92 for Q4.
Your fiscal year may not be the same as your fiscal year, which is a period that a company or government uses for accounting purposes and preparing financial statements. Many universities have a fiscal year which ends during the summer to align the fiscal year with the academic year. Retailers tend to end their fiscal years on January 31 to give them a more accurate financial picture to report. Other companies just want to save money on accounting and auditing fees which tend to be lower in off-tax seasons.
Revenue (Net Sales)
All income from normal business activities, such as a from translation services, interpretation, DTP, project management, etc. If you want to determine your financial health for a specific service item, only enter those specific data. For example, if you just want to know your profitability with translation services, only add cost items related to translation services also. DO NOT, for example, add cost related to interpretation or desktop publishing.
Because you can find this number on the top of your profit & loss statement, it is also called ‘the top line’, and sometimes people simply refer to it as ‘income’ or ‘gross income.’
Money that you have left over or lost after subtracting all you working expenses from your total revenue. This number shows what your company has earned (or lost) in a given period of time, which you need to define in field [Number of calendar days for this analysis]. Net profit does NOW include taxes. Enter the profit you made BEFORE you paid taxes.
Because you can find this number on the bottom of your profit & loss statement, it is also called ‘the bottom line.’
Direct Cost Of Goods Sold
Direct costs attributable to the production of the goods sold by a company. For language services providers, this might be a bit confusing, because they are selling services, not physical products. The number generally does also include direct labor costs used to render services, though.
Many LSP lump all their operations cost in this category, such as in-house translators, project managers, localization engineers, quality assurance managers, or DTP experts.
Team Lawless recommends to separate Direct Cost Of Goods Sold that can be attributed to a specific project from Direct Cost Of Goods Sold that cannot be attributed to a specific project.
Project managers and quality managers, for example, are often classified as Indirect Cost of Goods Sold as they typically support several projects at the same time. It is difficult to map their activity with specific projects unless you bill for their time on an hourly basis.
If you do bill project management on an hourly basis, you will need to include their salaries in ‘Direct Cost of Goods Sold’ here.
If you bill for project management on a percentage basis, e.g. 10% of total project value, you will need to include this cost category under ‘Indirect Cost of Goods Sold.’
Indirect Cost Of Goods Sold
Cost of those goods and services that you buy or pay for that cannot be attributed to a specific project, but contribute to a project in some way. These costs are harder to trace directly to individual projects or billable services.
Such services typically include project managers or quality managers that support several projects at the same time Their work is sometimes factored into a quote price for a service or word rate. For transparency reasons, many LSP bill such services as a percentage of their invoice value.
Cost for Sales, General and Administrative (SG&A)
Costs that occur during the daily operations of a company and are not directly or indirectly related to the rendering of client services. They include all expenses incurred to promote, sell, and manage the overall company.
Examples of SG&A include compensation of the company’s officers, cost and wages for marketing, sales, training, accounting, finance and other back office functions as well as rent, utilities, supplies, computers, etc.
SG&A cost do not include interest expense, which will be reported as a non-operating expense.
Money that your company has a right to receive because you have provided customers with translation and localization services. If a company has accounts receivables, this means it has made a sale but has yet to collect the money from the purchaser.
For example, you will have an account receivable when you deliver a translated document to a customer and the customer can pay within 45 days.
Accounts Receivables are often recorded as an asset on a company’s balance sheet, because the customer has a legal obligation to remit cash for the debt.
The total amount of money that your company owes because it purchased goods or services from a supplier or vendor and still needs to pay for them.
Accounts Payable are often recorded under current liabilities on a company’s balance sheet, because it’s a debt that must be paid off within a given period to avoid default.
Safe and Secure
None of your data in this LSP Health Meter will be recorded or submitted. There is not even an option to submit data or a requirement to log in with an account to use this calculator. You cannot be identified by any member of Team Lawless, and all your data will be deleted once you leave or refresh this page.
In addition, and to be extra sure, we have implemented a variety of security measures to maintain the safety of your personal information. We offer the use of a secure server. All supplied sensitive information is transmitted via Secure Socket Layer (SSL) technology, but none of your information that you will enter on this page will be stored on our servers.