Sales Activity Report

A sales activity report is one of the most significant analyses produced by an accounting department. Increased sales do not mean a direct increase in profit because all kinds of expenses must be factored into a financial analysis before net income is reported. Sales activity, however, is extremely important in determining whether a business is thriving or stagnant.

Any company that sells a product needs to sell that product at a profit if it wants to stay in business for very long. One of the most obvious ways to increase profit is to increase sales volume, but that is not always easy. This means increasing inventory and other assets and liabilities that generate income.

Increasing Liabilities

In order to grow, a company must expand its inventory, but it will also see its accounts receivable increase. Although necessary to growth, inventory and accounts receivable must be held in check, because they negatively affect cash flow. Another factor that management must consider is that more sales volume requires more operating cash balances.

Management must have frequent, accurate sales activity analysis because all these financial factors must be balanced. An increase in liabilities correlates to an increase in sales, but if the liabilities are not properly managed, they will overtake and reduce profits. The purpose of a sales activity report is not only to reveal sales volume, but to keep management informed so other assets and liabilities can be adjusted.