Profits being profits, they still boil down to revenue minus expenses.
Today’s post is from the SafeSourcing archives.
When you see a chart, often times the lines it contains represent some sort of average. A chart in an article in the Daily Chart section of Economist.com titled, “Taxing for some” illustrates how procurement fits into where companies place in these averages. The article is specifically about how corporate taxes have plummeted since the 1950s. No, the author does not mention procurement, but what is great about charts like this is that they can mean so many things depending upon what the author wants to highlight.
Here, the author is trying to highlight that corporate tax rates have plummeted, insinuating that this is somehow a negative phenomenon. The chart indeed does show that as a percent of GDP, corporate tax rates have dropped since the mid-50s. What is really interesting to me in this situation is a second line above the corporate tax line. It shows corporate profits as percentage of GDP. Here profits hover above 10 percent in the mid-50s and are peeking over 12 percent today. The years in the middle, however, show a bunch of zigzagging with a bottom of around 6 percent.
Being an average, the chart line represents both companies whose profits were above the line and those whose were below the line. Why did some fall above that specific point and some fall below? Certainly, there are innumerable factors. I just have to ask myself what role procurement played. Even back then, I have to believe that some companies were good at procurement and others were not so good. This article does not tell us why some companies were above the line and why some were below it, but procurement was certainly a factor. Profits being profits, they boil down to revenue minus expenses. I have to wonder how many of the companies who were bringing the line up in the 50s were doing so partially because a savvy procurement department kept expenses in line with the current costs of goods and services at the time. That being said, is your company above or below the line in today’s economy? Regardless of if you find yourself in the 50s, the 70s or the 2010s, you can always strive to do things better?
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