Calculating the percentage of sales to expenses is commonly referred to as the percentage of sales method. This method is used by business owners and employees within a business who create budgets to determine if the ratio of expenses to sales is appropriate. If ratios are too high, the business may make adjustments to reduce the expense percentage and increase profits. The calculation can be used to find the percentage of sales for all expenses and also for specific expense categories.
Calculate your total sales for the period. You can analyze data for any period of time, such as breaking it down daily, monthly, quarterly or annually.
Calculate your expenses for the same period of time for which you collect sales data.
Divide your expense total by the sales revenue total. The result is the percentage of sales to expenses. For example, if your revenue for a particular period equals $200,000 and your expenses for the same period equal $95,000, divide $95,000 by $200,000.The result is .475 or 47.5 percent. This means that, for the period analyzed, 47.5 percent of your sales goes toward expenses.
- Szepy/iStock/Getty Images