Transforming the profitability of your business sounds like a lot of change and upheaval. In fact, there are many small, easy-to-implement changes and efficiency improvements that can add up to a massive impact over time.
These can be implemented in a targeted way relatively easily and integrated into normal business routines. The hardest part can be knowing where to start. For that you need accurate and detailed financial data.
More Sales
Assuming – and that can be a big assumption – that you’ve weeded out the business lines that don’t generate meaningful profits, more sales will mean more profit.
If you can engineer it so that your cost of sales and overheads don’t increase significantly most of the margin will drop to your bottom line. A 5% increase in sales on the right product lines could have a much bigger impact on profitability.
Order Values
Once you’ve covered the cost of fulfilling and processing an order, anything else you can add by upselling or cross-selling is likely to have a high net profitability. Bundles and add-ons can be attractively priced and still boost profits.
Cash Flow
Profits and cash are not the same. But if you have an overdraft facility that you use, anything you can do to improve cash flow will boost your net profit by cutting interest payments. Establishing a routine of identifying and chasing overdue accounts will help, as will getting invoices out promptly.
Inventory
Do you routinely order the same stock items every month? When did you last check how many you have in stock to see whether you can pause the next order.
Inefficiencies and Cost Reduction
Where to start? That literally is the question.
Your financial data should identify your biggest cost lines, which is where you usually have the best opportunities for significant efficiencies.
Better financial data leads to more profitable decisions – big and small. If you need help straightening this out, get in touch.
Make your numbers make sense. Contact Rosy Jeffery Chartered Accountants on 01297 639 457 or read more in our Resource Centre.
