5 Tips to Increase Your Business Profitability
By Analytix Editorial Team
Business profitability is a function of several things, including effective management of finances. Here are 5 ways in which you can improve your business profitability.
- Minimize costs: Minimizing costs applies not just to reduction in expenses, but also to your suppliers and vendors. If needed, renegotiate with your key vendors and suppliers and work out more profitable rates. Review all your processes and systems. If you find that your manpower costs are very high, check to see if you can automate certain functions. Automation can streamline your operations and bring in higher degrees of accuracy to your end result, especially in cost-related functions.
At all times, keep track of competitor pricing. Complement your services and prices with value added services or products for your clients, wherever needed.
- Monitor productivity: This should be a constant. You need to communicate the importance of maintaining productivity to others in the business as well. Weed out problems and issues hampering productivity and incent or reward good performance. Monitor the high performers and those who have high profit margins. Key Performance Indicators such as margins, staff costs, forecasts, etc. all can be monitored to ensure higher productivity and profitability. If needed, hire a professional accountant to help you in this area.
- Increase your turnover: There are several ways in which to increase your turnover. You can aggressively pursue business development and new sales. You can also reduce expenses and production costs by reviewing your existing production and drawing up new plans wherever required.
- Review your customer service: Customers need to be retained proactively. Do not be content with simply meeting their needs. Keep a sharp eye on your service and ensure you reach out to them to keep abreast of developments in their business. Wherever possible, find ways in which you can assist them. Search for new opportunities and tailor solutions for them.
On the other hand, review your customers to separate those with lower profitability from those with consistently higher profitability. Focus on the high-profit customers while evaluating causes for those in the low-profit bracket. You may need to take a closer look at their needs and deliverables and make changes to convert them into higher paying clients.
- Review credit extended: Alongside improved customer service, review credit extended to your clients. Remember, credit can quickly turn into bad debt if not tracked well. Revise your credit limits and offer incentives for rapid payments. At this stage, you can also offer certain well-calculated discounts for early payments as well.
Analytix Solutions can assist companies in identifying appropriate solutions to boost profits and aid in business growth. For more information on our services, please visit us at http://www.analytixaccounting.com or email us at [email protected].