The Bottom Line
Net profit is simply money your company will make. The lifeline if you will. It is the financial security companies seek. It can be elusive. And it can be rewarding. Expansion and growth determine whether you company will have a future. And these are not possible without a healthy net profit. The bottom line should serve as a wake up call to everyone in your company. Improving your business’ net profit relies on your ability to generate sales. And the ability to make money from these sales.
Every business has strong points. Selling, if it isn’t one of them, it should be. Service is the next best area to concentrate on when it comes to net profit. Though these two areas, selling and service, should go hand and hand. It is hard to have a high volume of sales and poor customer service. As individual business managers you must be able to profit benefits everyone from the delivery drivers to the CEO.
Three things to be aware of:
Capital Expenses (increases when inventory control fails) Interest Rates (increases when working debts mount) Net Profit (decreases when prices and service drops)
You need to become a company that routinely operates efficiently and profitably. And yes, the hard part is that you must continue to satisfy your customers with the quality products, pricing and service that your customers value. To succeed, you must pay attention to the basics of business, you know to sell and service, can you prove know how to make money at it.
The First Step: Gross Profit
Lowering the selling price of your products just to make the sales sets up an even lower net profit. That hurts all sales incentive plans, and is creating more work for you down the road. In order to keep your business growing you must show the bankers, who finance your growth on the strength of your earnings, that you are continuing to make a profit.
The solution, you cannot continue to sacrifice prices for sales. You must compete with the level of service that your company and sales team are providing. Selling prices may be determined in the field or store. As long as everyone is in agreement on these prices and supports them with quality service you can concentrate on improving the bottom line. When your service level increase so too will your sales and the bottom line. If the selling price is an object sell up until the price and product are at the level customers desire.
Step Two: Accounts Receivable
Everyday, every dollar your not paid chips away at the profit of your business. And when selling price starts our close to the bone. It also doesn’t take long once the accounts goes over the terms to actually cost your company money. Most companies borrow against their account receivables to pay their bills. While the customers get their credit free or at much lower rates.
To solve the dilemma the customers need to pay their bills in the terms in which they agreed to when a credit line is opened for them. Yet they need to be treated professionally. Your sales and credit managers need to hold the line and make pricing and credit decisions, policies and procedures that are positive for both the customers and your company. This isn’t easy. It will take professional attention to the situation.