Mervin Winston, Ltd. - Case Studies

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Mervin Winston, Ltd.
CPA's and Business Consultants
3033 Campus Drive Suite W115
Plymouth, MN 55441
Phone: 763-557-6030
Fax: 763-557-9030
E-mail: info@mwinstonltd.com

Case Study - Improved Profit Margin

	Client Industry:	Construction

	Client Issue:	Need to improve profit margin and accounting timeliness

	Background:	A $2 million construction supply company was faced with untimely accounting and "out of control" discounting and sales allowance programs. The company was operating at a profit margin of 15% to 25% instead of at the anticipated 40% to 45% margin.

	The Mervin Winston Ltd., Solution:	Reviewed and analyzed all financial information. Analyzed profitability for the company's five different product lines. Analyzed profitability of the 10 highest sales volume customers. Reviewed the discounting and sales allowance programs. Evaluated the accounting system's integrity and worked with business owners to develop an improved accounting system. Developed actions to update financial information and generate accurate and current financial reports.

	The Results:	The owners realized customers were taking full advantage of the quantity discounting program and were exponentially purchasing larger amounts of product to receive larger discounts. It became clear that the company was providing sales allowances to cover free freight throughout the country and into Canada. Completely revised discounting program and dropped sales allowance program. Profit margin was turned around, going from a $150,000 loss to a $350,000 profit. Since making changes, the company has held profit margin at 40% or higher.