Development preview. Industry figures below are placeholder sample data, not IRS statistics. They will be replaced when the IRS Statistics of Income tables are loaded.
Acme Plumbing & HVAC, Inc. (fictional sample)
Your efficiency plan
Ranked by annual dollar impact. For each item: what the line covers, why it usually runs high, the steps to take, and how to track progress. The goal shown is closing half of each gap in the next year — a realistic first target.
Bring cost of goods sold in line with your industry
Cost of goods sold takes 69.0% of your sales; for similar businesses it is 62.0%. That leaves you a gross margin of 31.0% against 38.0%, or $44,100 less gross profit a year. Closing half the gap would add about $22,050 a year.
What it covers. Materials, parts and products you resell, direct labor on jobs or production, subcontractors, freight in, and other costs tied directly to what you sell.
- Prices that have not kept up with material and labor costs — the most common cause.
- Jobs quoted without a standard markup on materials, or change orders that never get billed.
- Labor hours running over estimates, rework and callbacks.
- Material waste, shrinkage, or job materials bought at retail instead of trade pricing.
- Compare your rates with two or three competitors and raise prices on the work where you are lowest; even a 3–5% increase moves this line a full point or more.
- Set a standard materials markup and put it in every quote and invoice template.
- Track estimated vs. actual hours and materials on every job for the next 90 days to find the job types that lose money.
- Bill every change order in writing before the extra work starts.
- Ask your top three suppliers for volume or trade pricing, and get one competing quote.
How to track progress. Gross margin (sales minus cost of goods sold, divided by sales) every month from your bookkeeping. Each point of margin is worth 1% of your revenue.
Collect from customers faster
Customers take an average of 47 days to pay you; similar businesses collect in 31. Collecting at the industry pace would free up about $27,593 in cash. This is cash freed up once, not yearly profit.
What it covers. Accounts receivable at year end compared with a year of sales.
- Invoices sent days or weeks after the work is done.
- No deposits on larger jobs.
- No routine follow-up on overdue accounts.
- Invoice the day the job is complete — from the field if possible.
- Take deposits on larger jobs and progress-bill long ones.
- Keep a card on file for repeat customers and offer online payment links.
- Call on every invoice at 30 days; pause new work for customers past 60.
How to track progress. Days to collect each month (receivables ÷ monthly sales × 30), and dollars over 60 days.
Bring vehicle and fuel costs in line with your industry
You spend 7.8% of sales on vehicle and fuel costs; sole proprietors in your industry average 4.9%. That is $18,270 more a year than the industry average. Closing half the gap would add about $9,135 to profit each year.
What it covers. Fuel, insurance, repairs, registration and lease payments for business vehicles (or the standard mileage rate).
- More vehicles than the work requires, or trucks larger than the job needs.
- Inefficient routing and long drives between jobs.
- Personal use of company vehicles.
- Older, high-mileage vehicles with poor fuel economy.
- Count vehicles against active crews; sell or park any truck that is not used most days.
- Use route-planning software and group jobs by area.
- Issue fleet fuel cards with per-vehicle limits and review the monthly report.
- Document personal use; personal miles should be reimbursed or treated as compensation.
- Price replacing the least fuel-efficient vehicle when its repair costs are also high.
How to track progress. Vehicle cost per vehicle and per job each month.
Bring repairs and maintenance in line with your industry
You spend 2.6% of sales on repairs and maintenance; similar businesses average 1.4%. That is $7,560 more a year than the industry average. Closing half the gap would add about $3,780 to profit each year.
What it covers. Repairs to vehicles, equipment, tools and buildings that are not capitalized and depreciated.
- Aging vehicles or equipment that now cost more to keep running than to replace.
- No preventive maintenance, so small problems turn into big repair bills.
- Equipment damage from misuse or lack of training.
- Improvements that should have been capitalized being expensed as repairs (check with your CPA).
- List every repair over $500 this year by vehicle or machine; anything on the list three or more times is a candidate to replace.
- Compare each problem unit's annual repair cost with the monthly payment on a replacement.
- Put vehicles and key equipment on a written preventive-maintenance schedule.
- Ask your CPA whether any large items should be capitalized instead — this changes the tax picture, not the cash.
How to track progress. Repair cost per vehicle or machine each quarter, and total repairs as a percent of sales.
Strengthen short-term liquidity
You have $0.90 in short-term assets for every $1 of bills and debt due within a year; similar businesses have $1.60. Below $1.00 means more is due this year than you can readily turn into cash.
What it covers. Cash, receivables and inventory compared with bills and debt due within a year.
- Operating losses drawing down cash.
- Owner draws or distributions above profit.
- Equipment bought with cash or short-term debt instead of term loans.
- Build a 13-week cash forecast and review it weekly.
- Hold owner distributions to what the business actually earns until the ratio is above 1.2.
- Move equipment financed on a line of credit to a term loan.
- Collect receivables faster (see days to collect).
How to track progress. Current ratio at each month end from your balance sheet.
Reduce debt relative to equity
The business owes $3.44 for every $1 of owner equity; similar businesses owe $1.40. Lenders weigh this heavily when you apply for credit.
What it covers. Everything the business owes compared with the owners' equity in it.
- Losses that reduced equity.
- Distributions above profit.
- Heavy borrowing for equipment or to cover shortfalls.
- Leave part of each year's profit in the business to rebuild equity.
- Pay down the highest-rate debt first.
- Avoid new borrowing until the trend turns.
How to track progress. Total liabilities ÷ equity each year-end; lenders watch this closely.
Build a cash reserve
Year-end cash covers 0.4 months of operating costs; similar businesses hold about 1.5 months. A slow month or a large repair could force borrowing.
What it covers. Year-end cash compared with one month of operating costs.
- Thin margins.
- Distributions above profit.
- Slow collections.
- Set a target of at least one month of operating costs in cash, then build toward two.
- Move a fixed percentage of every deposit into a separate reserve account.
- Open or increase a bank line of credit while the business is healthy, as a backstop.
How to track progress. Cash balance ÷ average monthly expenses, each month.
Distributions taken in a loss year
The company distributed $18,000 while reporting a loss. Distributions above stock basis are taxable; confirm basis on Form 7203.
Loans to shareholders: $38,500
Up from $24,000 at the start of the year. Undocumented owner loans can be reclassified by the IRS as wages or distributions. Repay, or document with a signed note, interest and a payment schedule.
Test more advertising
You spend 0.6% of sales on advertising; similar businesses spend 1.5%. Spending less than peers is only a saving if your pipeline stays full.
What it covers. Paid ads, directories, print, signage, websites and marketing services.
- Relying entirely on referrals, which limits how fast you can grow or replace lost customers.
- No time to manage marketing.
- If you have capacity for more work, set a small monthly test budget (for example 0.5% of sales).
- Start with channels you can measure: local search ads and your Google Business Profile.
- Ask every satisfied customer for a review — it costs nothing and lifts every other channel.
- Track how each new customer found you and keep only what pays back.
How to track progress. New customers per month and cost per new customer by channel.
Line by line
Every cost line on your return as a share of sales, compared with the industry average for businesses of your type and size. In the gap column, a minus sign means you spend more than the industry average each year; a plus sign means you spend less.
| Line | Item | Amount | You | Industry | Gap / yr | Rating |
|---|---|---|---|---|---|---|
| 2 | Cost of goods sold (Form 1125-A) | $434,700 | 69.0% | 62.0% | –$44,100 | Well above industry |
Cost of goods sold takes 69.0% of your sales; for similar businesses it is 62.0%. That leaves you a gross margin of 31.0% against 38.0%, or $44,100 less gross profit a year. Closing half the gap would add about $22,050 a year. What it covers. Materials, parts and products you resell, direct labor on jobs or production, subcontractors, freight in, and other costs tied directly to what you sell. Common causes. Prices that have not kept up with material and labor costs — the most common cause. Jobs quoted without a standard markup on materials, or change orders that never get billed. Labor hours running over estimates, rework and callbacks. Material waste, shrinkage, or job materials bought at retail instead of trade pricing. What to do. See item 1 in your efficiency plan for the steps and how to track progress. | ||||||
| 7 | Compensation of officers | $52,000 | 8.3% | 6.0% | — | For reference |
Officer pay totals $52,000, 8.3% of sales; similar businesses average 6.0%. How to read it. This is owner compensation, not a cost to cut. For an S corporation the IRS expects officers who work in the business to take a reasonable salary before distributions; set it from what you would pay someone else to do your job. | ||||||
| 8 | Salaries and wages (less employment credits) | $24,000 | 3.8% | 7.0% | +$20,100 | Better than peers |
You spend 3.8% of sales on wages; similar businesses average 7.0%. That is $20,100 less a year than the industry average. What it covers. Wages for employees who are not owners (for an S corp, officer pay is on line 7 instead). Why it may be lower. Wages are lower than peers. That can be efficiency — or a sign that labor is reported in cost of goods sold, that you use subcontractors instead, or that the owner is doing work an employee would normally do. Compare total labor (wages, labor in cost of goods sold and contract labor) before treating this as a saving. | ||||||
| 9 | Repairs and maintenance | $16,380 | 2.6% | 1.4% | –$7,560 | Well above industry |
You spend 2.6% of sales on repairs and maintenance; similar businesses average 1.4%. That is $7,560 more a year than the industry average. Closing half the gap would add about $3,780 to profit each year. What it covers. Repairs to vehicles, equipment, tools and buildings that are not capitalized and depreciated. Common causes. Aging vehicles or equipment that now cost more to keep running than to replace. No preventive maintenance, so small problems turn into big repair bills. Equipment damage from misuse or lack of training. Improvements that should have been capitalized being expensed as repairs (check with your CPA). What to do. See item 4 in your efficiency plan for the steps and how to track progress. | ||||||
| 10 | Bad debts | $0 | 0.0% | 0.2% | +$1,260 | In line |
You reported no bad debts; similar businesses average 0.2% of sales. What it covers. Customer balances you wrote off as uncollectible (accrual-basis businesses only). What to keep in mind. No bad debts were written off. If you use the cash basis this line is always zero; review your receivables aging for accounts that are unlikely to be paid. | ||||||
| 11 | Rents | $19,530 | 3.1% | 4.4% | +$8,190 | Better than peers |
You spend 3.1% of sales on rent; similar businesses average 4.4%. That is $8,190 less a year than the industry average. What it covers. Rent for your shop, office, yard or storage space. Why it may be lower. Rent is lower than peers. If you rent from yourself or a related party, make sure the rent is at fair market value; if you work from home, your home-office deduction may cover part of this. | ||||||
| 12 | Taxes and licenses | $7,400 | 1.2% | 2.5% | +$8,350 | Better than peers |
You spend 1.2% of sales on taxes and licenses; similar businesses average 2.5%. That is $8,350 less a year than the industry average. What it covers. Usually the employer share of payroll taxes, plus business licenses, property taxes and some state taxes. Income taxes do not belong here. Why it may be lower. Taxes and licenses are lower than peers, which usually follows lower wages. Make sure payroll taxes and local licenses are all current. | ||||||
| 13 | Interest | $6,200 | 1.0% | 0.7% | –$1,790 | In line |
You spend 1.0% of sales on interest costs; similar businesses average 0.7%. That is about $1,790 a year more than the industry average — close enough to count as in line. What it covers. Interest on loans, lines of credit, equipment notes and business credit cards. What to keep in mind. Interest is in line with peers. Review your rates once a year and refinance anything above what your bank would offer today. | ||||||
| 14 | Depreciation not claimed on Form 1125-A or elsewhere | $41,500 | 6.6% | 2.5% | — | For reference |
Depreciation is $41,500, 6.6% of sales; similar businesses average 2.5%. How to read it. Higher-than-average depreciation usually reflects recent equipment or vehicle purchases written off quickly with Section 179 or bonus depreciation, not inefficiency. It is a non-cash deduction, so it is added back in true owner earnings. If it stays high every year, compare how much equipment you buy with how much revenue it produces. | ||||||
| 16 | Advertising | $3,780 | 0.6% | 1.5% | — | Below peers |
You spend 0.6% of sales on advertising; similar businesses spend 1.5%. Spending less than peers is only a saving if your pipeline stays full. What it covers. Paid ads, directories, print, signage, websites and marketing services. Common causes. Relying entirely on referrals, which limits how fast you can grow or replace lost customers. No time to manage marketing. What to do. See item 10 in your efficiency plan for the steps and how to track progress. | ||||||
| 17 | Pension, profit-sharing, etc., plans | $0 | 0.0% | 0.4% | +$2,520 | In line |
You reported no retirement plan costs; similar businesses average 0.4% of sales. What it covers. Employer contributions to 401(k), SIMPLE, SEP or similar plans. What to keep in mind. No retirement plan contributions were reported. A SEP, SIMPLE IRA or Solo 401(k) can cut taxes for the owner and help keep employees — ask your CPA which fits. | ||||||
| 18 | Employee benefit programs | $2,900 | 0.5% | 1.0% | +$3,400 | Better than peers |
You spend 0.5% of sales on benefit costs; similar businesses average 1.0%. That is $3,400 less a year than the industry average. What it covers. Health insurance and other benefit programs for employees. Why it may be lower. Benefit costs are lower than peers. Lean benefits save money but can make hiring and keeping good people harder in a tight labor market. | ||||||
| 20 | Other deductions (attach statement) | $80,240 | 12.7% | 5.9% | — | For reference |
Other deductions total $80,240, 12.7% of sales (similar businesses: 5.9%). Each item is compared separately in the next section, so it is not rated here. What it covers. Everything on the return's 'other deductions' or 'other expenses' statement. | ||||||
Other deductions, item by item
IRS corporate and partnership data do not break out these items, so each is compared with sole proprietors in the same industry — the closest published figures.
| Category | Amount | You | Industry | Gap / yr | Rating |
|---|---|---|---|---|---|
| Vehicle & fuel | $49,140 | 7.8% | 4.9% | –$18,270 | Well above industry |
You spend 7.8% of sales on vehicle and fuel costs; sole proprietors in your industry average 4.9%. That is $18,270 more a year than the industry average. Closing half the gap would add about $9,135 to profit each year. What it covers. Fuel, insurance, repairs, registration and lease payments for business vehicles (or the standard mileage rate). Common causes. More vehicles than the work requires, or trucks larger than the job needs. Inefficient routing and long drives between jobs. Personal use of company vehicles. Older, high-mileage vehicles with poor fuel economy. What to do. See item 3 in your efficiency plan for the steps and how to track progress. | |||||
| Insurance Includes: Insurance - general liability and auto $14,800 | $14,800 | 2.3% | 2.2% | –$940 | In line |
You spend 2.3% of sales on insurance; sole proprietors in your industry average 2.2%. That is about $940 a year more than the industry average — close enough to count as in line. What it covers. General liability, commercial auto, property, workers' compensation and other business insurance (not health). What to keep in mind. Insurance is in line with peers. Have an independent agent re-shop it every two to three years even when nothing changes. | |||||
| Utilities & phone Includes: Utilities $4,100 · Telephone $3,200 | $7,300 | 1.2% | 0.8% | –$2,260 | In line |
You spend 1.2% of sales on utilities and phone; sole proprietors in your industry average 0.8%. That is about $2,260 a year more than the industry average — close enough to count as in line. What it covers. Electricity, gas, water, trash, phone and internet. What to keep in mind. Utilities are in line with peers. Ask your utility about free efficiency audits. | |||||
| Legal & professional Includes: Accounting $3,600 | $3,600 | 0.6% | 0.6% | +$180 | In line |
You spend 0.6% of sales on professional fees; sole proprietors in your industry average 0.6%. That is about $180 a year less than the industry average — close enough to count as in line. What it covers. Attorney, accounting, bookkeeping, consulting and other professional fees. What to keep in mind. Professional fees are in line with peers. | |||||
| Office & software Includes: Office expense $2,100 | $2,100 | 0.3% | 0.5% | +$1,050 | In line |
You spend 0.3% of sales on office and software costs; sole proprietors in your industry average 0.5%. That is about $1,050 a year less than the industry average — close enough to count as in line. What it covers. Software subscriptions, office supplies, postage and small office equipment. What to keep in mind. Office costs are in line with peers. Review recurring subscriptions once a year. | |||||
| Supplies & tools Includes: Supplies $1,500 | $1,500 | 0.2% | 2.0% | +$11,100 | Better than peers |
You spend 0.2% of sales on supplies; sole proprietors in your industry average 2.0%. That is $11,100 less a year than the industry average. What it covers. Supplies, small tools and consumables not included in cost of goods sold. Why it may be lower. Supplies are lower than peers. Many businesses record job supplies in cost of goods sold instead, so compare the two together. | |||||
| Bank, card & processing fees Includes: Bank charges $900 | $900 | 0.1% | 0.4% | +$1,620 | In line |
You spend 0.1% of sales on fees and commissions; sole proprietors in your industry average 0.4%. That is about $1,620 a year less than the industry average — close enough to count as in line. What it covers. Card-processing fees, bank charges, platform fees and sales commissions. What to keep in mind. Fees are in line with peers. Check your card-processing rate once a year. | |||||
| Meals | $900 | 0.1% | 0.2% | +$360 | In line |
You spend 0.1% of sales on meals; sole proprietors in your industry average 0.2%. That is about $360 a year less than the industry average — close enough to count as in line. What it covers. Business meals with clients, staff and prospects (generally 50% deductible). What to keep in mind. Meals are in line with peers. Keep notes on who attended and the business purpose. | |||||
Assets, liabilities and cash
From Schedule L at the end of the year.
| Measure | You | Industry | Rating |
|---|---|---|---|
| Current ratio | 0.90 | 1.60 | Weaker |
Short-term assets for every $1 of bills due within a year. You have $0.90 in short-term assets for every $1 of bills and debt due within a year; similar businesses have $1.60. Below $1.00 means more is due this year than you can readily turn into cash. See item 5 in your efficiency plan for causes, steps and how to track progress. | |||
| Quick ratio | 0.77 | 1.30 | Weaker |
Cash and receivables for every $1 of short-term bills, without counting inventory. Counting only cash and receivables, you have $0.77 for every $1 due within a year; similar businesses have $1.30. What it covers. Cash and receivables only, compared with bills and debt due within a year. Common causes
Steps to take
How to track progress. Quick ratio at each month end. | |||
| Days to collect receivables | 47 days | 31 days | Much weaker |
How long customers take to pay you, on average. Customers take an average of 47 days to pay you; similar businesses collect in 31. Collecting at the industry pace would free up about $27,593 in cash. See item 2 in your efficiency plan for causes, steps and how to track progress. | |||
| Days of inventory on hand | 15 days | — | No benchmark |
How long inventory sits before it is used or sold. | |||
| Days to pay suppliers | 40 days | — | No benchmark |
How long you take to pay suppliers. | |||
| Liabilities to equity | 3.44 | 1.40 | Much weaker |
Dollars owed for every $1 of owner equity. The business owes $3.44 for every $1 of owner equity; similar businesses owe $1.40. Lenders weigh this heavily when you apply for credit. See item 6 in your efficiency plan for causes, steps and how to track progress. | |||
| Months of cash on hand | 0.4 mo | 1.5 mo | Much weaker |
How many months of operating costs your cash would cover. Year-end cash covers 0.4 months of operating costs; similar businesses hold about 1.5 months. A slow month or a large repair could force borrowing. See item 7 in your efficiency plan for causes, steps and how to track progress. | |||
True owner earnings
Red flags
Does the return tie out?
We re-add the totals on your return. Anything that does not match is shown so you can confirm the figures we read.
| Check | Calculated | On return | Result |
|---|---|---|---|
| Line 1c = 1a − 1b | $630,000 | $630,000 | Ties |
| Line 3 = 1c − 2 | $195,300 | $195,300 | Ties |
| Line 6 = 3 + 4 + 5 | $195,300 | $195,300 | Ties |
| Line 21 = lines 7 through 20 | $253,930 | $253,930 | Ties |
| Line 22 = 6 − 21 | –$58,630 | –$58,630 | Ties |
| Statement total = line 20 | $80,240 | $80,240 | Ties |
| Schedule L total assets (beginning of year) | $310,500 | $310,500 | Ties |
| Schedule L total liabilities & equity (beginning of year) | $310,500 | $310,500 | Ties |
| Schedule L balances (beginning of year) | $310,500 | $310,500 | Ties |
| Schedule L total assets (end of year) | $297,600 | $297,600 | Ties |
| Schedule L total liabilities & equity (end of year) | $297,600 | $297,600 | Ties |
| Schedule L balances (end of year) | $297,600 | $297,600 | Ties |