Businesses that want to get a more detailed view of their finances can use class tracking to determine which areas of the business are doing well and which need improvement. It lists income and expenses that are broken down into categories like department, service type, product type, or overhead.
Class tracking is especially helpful for companies in the retail, distribution, service, or manufacturing industries. For example, restaurants with bars that also cater can track bar sales separately from the two types of food sales. Specific expenses in each category can also be tracked, making it easier to see where a business is performing best. So, liquor sales may be great, but expenses for labor, glasses, and other bar items may mean that section of the restaurant is actually losing money.
Why is Class Tracking Important?
Without class tracking, it can be easy to interpret overall positive numbers as a sign the business is doing fine, even if certain areas are underperforming. Along with helping to identify business opportunities, class tracking helps a company get ahead of potential problem areas before they become serious headaches.
What P&L statements and balance sheets lack in detail, class tracking makes up for by painting a much clearer picture of the business’ financial standing. Used wisely, the method can empower a business to make smart decisions. They’re also helpful when seeking funding or applying for business loans.