Profitable P&C Associations
Are your P&C’s trading activities profitable?
Many P&C’s run a combination of tuckshop, uniform shop and book shop. These services provide a great benefit for the school community, but are they returning a profit for the P&C’s scarce resources?
Steps that can be taken could be ensuring trading statements for each activity must be produced each month for the regular P&C meeting, instead of the minimum requirement of each quarter.
Given the resources that the P&C will tie up in these activities, you must know that they are covering costs, and so any trends can be noticed (they may be early indicators of a problem like fraud or theft).
Two important items that should be analysed are Gross Profit Percentage (GP%) and Net Profit.
GP% gives an indication of the profit being made on direct goods being sold. It is calculated by dividing the Gross Profit (Sales less Cost Of Goods Sold) by Gross Sales. You might find that if you use computer or cloud-based bookkeeping software, this will automatically be calculated for you in the reports.
If the GP% is low or inconsistent then it may indicate any of the following:
- Prices are too low (need to review the mark-up % on goods)
- Stock is being lost or wasted (tuckshop’s perishable goods)
- Giveaways are too high (what is the policy and who approves these?)
- Money, stock or both are being pilfered (are controls in place?)
The Net Profit analysis is the next step for the trading activity where any direct or indirect expenses are taken from the Gross Profit to give the true Profit figure for the activity.
These expenses might be wages, electricity, cleaning and other items that are not included in the Cost Of Goods Sold.
The Net Profit ultimately indicates the benefit of the activity to the P&C.
If it isn’t profitable, the P&C should investigate why and consider if any changes need to be made to pricing and expenses incurred. It might even mean that the activity isn’t the best use of P&C resources.