As our main objective to enhance net operating income except increasing sales so, at very first we have to define what is the meaning of net operating income (NOI)? The so simple answer is income after deducting operating expenses, before ducting interest and income taxes is called net operating income (NOI). In the income statement or P/L account if it is shows a positive figure then it is treated as net operating income where if it is shows a negative figure then it is called net operating loss (NOL). Also there are a number of accounting conventions, at what times net operating income (NOI) may enhance except increasing sales. In support of better understanding, it is quite essential to gain some knowledge on how net income is resulting. As also we know any standard income statement or P/L accounts starts with revenues or sales and it subtracts COGS (Cost of goods sold) from the revenues or sales appear at gross profit margin then it subtracts every costs linked administrative operations from gross profit margin to come out at NOI (net operating income).
Now let’s we move to our main topic, if we want to enhance business net operating income except increasing sales then we have understand clearly cost of goods sold and operating expenses what they includes.
Level –A) Collect chart of accounts copy from your business accounts department then there you’ll see all schedule of linked values and accounts.
Level – B) Identify the all items that includes in the COGS (Cost of good sold) these items are called variables, there values associated with the levels of productions. You will see values go up when production level increased. These items are directly associated with generation of sales also you know the most familiar items is “Inventory” and depreciation of expenses in the COGS (Cost of good sold) which is write off item to capital assets category.
Level – C) Now you have to identify those items that are involved as operating expenses. Operating expenses includes telecommunications costs, traveling costs, supplies expenses etc.
Level – D) Then after levels “C”, think about lower of the cost of goods sold (COGS), provide a possibility to procure or supply chain to keep lower the cost of sales and inventory over contract pricing as lower. Check out discounts has already been taken in to account or not? Make a tally of in house allocation cost by outsourcing. In some cases, hire a more variable and hourly basis employees for your organizations.
Level – E) And in the final level “E”, please may I suggest you to consider, operating income with lower link costs? Because of these costs typically are fixed types, as a result of this cost saving formula that can give you a good output like long lasting & vitality in business operations. Use techniques like spending little more expenses in telecommunications expenses rather than less in traveling expenses, it will save time and money both. By that your employee may involve with other effective works. Ensure, either you get office supplies discounts or your product or services pricing of contract with vendor is OK or not? Try to reduce the expenses, because of cost saving, you can grow your income, check out another better business locations with less rent, and look for a better competitive rates or prices if you buy products from manufacturer or producers directly.
At last, now I think after read out this article you already got your main key points where you should concentrate to enhance your net operating income (NOI) except increasing sales.
