For example, if you want to calculate the percentage of how many days it rained in a month, you would use the number of days in that month as the total amount. So, let’s say we are evaluating the amount of rain during the month of April, which has 30 days. Learn how to use the sales revenue formula so you can gauge your company’s continued viability and forecast more accurately.

If you want to make financial planning decisions based on your business’s historical performance, then the percentage-of-sales method is your new best friend. So, I am sure now you know everything about how to calculate the percentage of sales. The information becomes especially useful in comparing figures from previous years and making budgeting decisions for the future. From the above example, you can see that sales expenses have a higher percentage of sales than do administrative expenses. You may want to compare the percentage of sales to different categories of expenses in addition to total expenses.

## Step 2 of 3

Any fixed expenses — like fixed assets and debt — can’t be projected with the percent of sales method. The balance in this account will always be a function of a predetermined percentage of credit sales when the net-sales method is used. Based on this data, the debit to the uncollectible accounts expense is 2% of net credit sales of $1 million, or $20,000. First, it reduces the value of the receivables percentage of sales method formula to the amount of cash expected to be realized in the future. Second, it matches the uncollectible expense of the current period with the related revenues of the period. In conclusion, the Percent of Sales Calculator is a simple and effective tool that can help businesses measure the performance of their products or services and make data-driven decisions to improve their bottom line.

Here are some of the reasons the percentage-of-sales method might not be for you. That’s what we’ll cover in this guide to the percentage-of-sales method. Once she has the specific accounts she wants to keep tabs on, she has to find how https://www.bookstime.com/articles/tax-form-1120 they stack up to her overall sales figures. The balance in the Allowance for Uncollectible Accounts Expense is @22,000 – $2,000 from the prior year’s sales that have not yet been determined uncollectible and $20,000 from 2019 sales.

## What is the percentage of sales method?

If your sales were higher in the same period last year, the economy, and not your sales strategy, may be to blame. Instead, you might compare sales from two successive fiscal years ending on March 31st. You would compare an earlier, lower sales period with a later, higher one. For example, you would not compare net sales from one quarter of one fiscal year with the whole year from another. From sales funnel facts to sales email figures, here are the sales statistics that will help you grow leads and close deals. We’ll walk through an example with a positive net income, but we will also point out spots where problems could occur and lead to a negative net income.