Increasing Profits Without Sales!

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The article provides an overview of how expense reduction is equally important as sales growth in profit generation.

When business owners or financial managers think about increasing profits in their firm we think the first thing that comes to mind is selling more, or increasing revenue. We can also turn that thought upside down and increase is profits without any additional sales - How? Expense reduction.

We know that sales are necessary for business survival, and that profits are even more necessary. It is the expense column of an income statement that turns those sales into losses, not profit!

Business owners could do very well to focus as much sometimes on expense reduction. As an example a thousand dollars in sales might increase profits by 100$ but a 100$ decrease in costs is the same as 100$ increase in sales! So management should focus on putting effort into that very leverage statement we have just made.

Well, we have identified the solution. How do we get there? Let's look at some very obvious and not so obvious solutions.

Anyone for an 'upgrade '? Use of internal of government funded training can improve employee skills and output. This is a long term investment with great rewards.

Employees should also then be incented to be more productive, this can be done in many ways, not the least of which is a reward for the employee suggestion box winner! Open door policy on suggestions has saved many firms thousands, sometimes millions. (In larger firms)

On the payroll issue a firm could add a shift as opposed to paying overtime. Some employees could actually be outsourced to reduce expenses. The independent contractor is clearly here to stay, whether we like it or not.

Employers should also investigate that they are paying only what is required re Unemployment insurance and workers compensation.

A company buys things. Purchasing or management should make an effort to buy smarter - negotiate better pricing with cash, take discounts, etc. Supplier relationships are key to any company's survival - but no supplier should think they are 'in for life 'without it being a mutually beneficial relationship.

Firms can also advertise better - in the internet age a small investment in websites, social media etc has huge paybacks.

Business owners are cautioned to research the DUPONT FORMULA. It's a simple financial tool that shows you that if you turn inventories faster and increase collections you can become more profitable.

Naturally some of the very basics still can sometimes be overlooked - i.e. reduction in postal and courier expenses.

What's the bottom line? Cut costs, increase profits. No sales required, but they sure are helpful!

Stan Prokop is the founder of 7 Park Avenue FInancial. See http://www.7parkavenuefinancial.com. The company originates business financing for Canadian companies and is a specialist in working capital and asset based financing of all types. For more information or contact details please see: http://www.7parkavenuefinancial.com/Home_page.html




7 Park Avenue Financial :

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '














Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/3637858

The Operating Cycle - My Washing Machine Or My Business Cash Flow ? !

The 'operating cycle is a distinct part of any business. Frankly we believe that most business owners intuitively know it exists - they just didn't know it had a name.

The operating cycle is the repetitive pattern of a turnover of a businesses current assets and liabilities. Let's examine that in a bit more detail. In essence each business establishes within their company, and probably within their industry, a repetitive pattern of turnover.

In the first phase of the operating cycle a business, unless it is a service business, buys inventory and materials which they will resell to customers. Normally these goods are obtained on credit. The company buys product, and obviously has an account payable to that supplier. So we find that company paying their supplier, cash goes down and inventory goes up. So far so good.

In phase two of the operating cycle the company sells product to a customer. More often than not it sells on credit - this generates accounts receivable - the good news is that the company can finally record sales, or revenue.

In phase three, the final phase of our operating cycle, the company collects the receivable and converts the entire process we have gone through back into cash.

Yes, our analysis is over simplified, and of course behind all these processes the company has administrative and sales costs that back up the entire operating cycle. All of these costs are in some manner related to the final sale and have some sort of contribution in that regard.

We also need to remember that through the entire process bank loans or working capital facilities regularly turn over. Hopefully !

Each company and industry has a different operating cycle - within each industry some companies are clearly doing better than others. How is your company doing?

One of the best know ways to measure a firms operating cycle is a formula created by the DUPONT COMPANY many years ago - not surprisingly the formula is called the DUPONT FORMULA!

The formula looks at relationships, or ratios, in the balance sheet and income statement and provides solid ways of measuring the operating cycle and how it affects a company's profit, and operations. It provides a lot of insight into how a company can improve profitability by emphasizing asset turn over and showing how it's important as sales.

Even a non- financial person should be able to understand this - we are simply saying that if a company can buy something, sell it, and collect the money fast and start all over that will increase profits over a company who takes twice as long to repeat that entire process. Sales are not always the be all and end all! A company, using DUPONT, can show that even if they make a little less on each sale, but turn over inventory and receivables faster, can do as well or better than the competitor.

In summary, a true understanding of the operating cycle allows a business owner or financial manager to focus on expenses, asset turn over, and margins, and see the inter - relationship of all these three components of a business. Understanding and improving your operating cycle with the right type of financing will make your firm a leader, not a laggard, in your industry.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS CASH FLOW FINANCING



Stan Prokop is the founder of 7 Park Avenue Financial. See

http://www.7parkavenuefinancial.com

The company originates business financing for Canadian companies, and is a specialist in lease financing, working capital financing and acquisition financing on behalf of clients.
For more information, or questions ->

http://www.7parkavenuefinancial.com/business_financing_services.html