The Use of Invoice Sampling to Estimate Profit Margin

When information is needed about the characteristics of a “population”, statistical sampling can save time, money and effort. Although some loss of accuracy is inevitable when dealing with samples, the error can be calculated and controlled provided the sample is carefully selected so that it is representative of the population from which it is drawn. This article discusses the application of sampling methods and sampling theory to invoice data for management information purposes, and describes a real case of a wholesale company, where it was found that invoice sampling gave better estimates of profit margins than the standard historical accounting data. An elementary knowledge of statistics is assumed.