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The article provides an overview of how expense reduction is equally important as sales growth in profit generation.
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 :
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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 .
Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698
Article Source: http://EzineArticles.com/3637858
