10 Actions to Immediately Improve Profitability (Part 1)
Finding new profit calls for new ways of reviewing your business. Looking at your business from a different perspective can be challenging, but could be essential to increasing your profitability. If you feel like your profit has remained stagnant, or is decreasing, it is time to put these methods into action.
CFO Centre has identified 10 ways to get you started, here are the first 5:
1. Key Performance Indicators (KPI) reporting
Identify the most important KPIs (net revenue, customer loyalty etc.) that are key and relevant for your business. Calculating and reporting these statistics in a timely manner provides a snapshot of actual business performance. Understanding how your business is performing in real time and compared to target KPIs allows you to identify any issues before they may affect the bottom line.
2. Business Planning
When you are busy running a business it is very easy to just concentrate on day-to-day problems and forget the bigger picture. Investing time to create a business plan is important for future success and growth of your business. Business planning allows you to create a vision and set measurable goals in order to achieve your vision. If you already have a business plan, then ensure you review and update frequently.
3. Managing Cash Flow
Creating cash flow forecasts are beneficial to know when money is coming in and going out in order to prepare for any delays and/or shortfalls. Managing the following secondary cash drivers will assist to increase the availability of cash;
Debtors – Invoice promptly, invoice progress payments, offer discounts for prompt payment, offer different payment options
Creditors – negotiate credit terms, take advantage of discounts, don’t pay earlier then required and pay the most important bills first
Inventory – accurate & timely record keeping, consider just-in-time inventory, replace slow-moving projects and mark down dead inventory for quick sale
4. Focusing on Customer Retention
Value your customers and encourage them to keep coming back by ensuring you meet their needs and provide a quality service. Be sure you are always following through on deliverables and meeting deadlines, communicating regularly and allowing customers to provide feedback.
Once a customer has entered the business, effective cross selling, upselling and bundling techniques can dramatically increase the average dollar spend.
5. Developing Best Practices
If your business processes were developed many years ago and if the comment “this is the way it’s always been done” sounds familiar then it may be time to review your processes. Best practice means adopting the best ways of working to achieve your business objectives.
Be sure to check back on February 18th for 5 more profit improvement tips.
This article is being reproduced courtesy of The CFO Centre Australia and their business partners HLB Mann Judd.
Business Advisory Services
HLB Mann Judd