Personnel expenses including mangement's must be analyzed in every company transaction, because their effect in company's competitveness and net income can not be underestimated.
Personnel expenses is an expense group, where by organizing company operations, that can affect the profitability of the company.
Management's salaries. Here you input only the portion of management salaries that can be reasonably identified as too high (as a positive figure) or as a negative figure if the work effort is higher than the salaries paid. This is important to clarify in companies where the owners work and get paid salary or lift dividends regardless of the type of the company.
1) Adjustments that decrease the net income include:
- Underpayment of salaries
- Owner does the work of 2 people
2) Adjustments that increase the net income include:
- Managements extensive salaries and options.
- Combining of operations and reduction of unnecessary staff
- outsourcing of production for example to India