If you want to enjoy heavenly profits you are going to have to work like the devil on the details to ensure that you have enough discipline in your business to maximize profits. Too frequently, small and medium sized companies avoid paying enough attention to interpreting and communicating information about the company’s past, current, and future operations. This results in a business that cannot operate at its highest level of performance because great measurement and reporting systems are not in place to allow the leaders and managers to make great decisions quickly with data. Following some of these Financial Management and Gross Profit best practices will make an enormous difference in your ability to identify numbers that will point to performance improvements. Remember, the devil is in the details, and if you work like the devil, it can lead your organization to heavenly profits!
Prices: Price your products, services and solutions in consideration of market and competitive forces, keeping all factors in balance. Considerations should include: what the market will bear, continued customer loyalty, growth in the business, and maximizing profits.
Terms: Negotiate more favorable credit terms from your suppliers if you haven’t in a while. Ensure that your customers are following your credit terms appropriately, and address issues and reset expectation appropriately to increase your cash flow to help you finance growth in the business.
Expenses: All variable expenses (Costs of Goods Sold) should be at the lowest possible practical level, to ensure that you’re not wasting your financial resources. This also ensures that your company is balancing continued growth and cash production, leading your team to the highest gross margin.
Sales Compensation: Review your sales compensation plans and ensure that there is an appropriate balance between base salaries and commission based incentives. Remember that many people are motivated by extrinsic incentives like commissions, but some of us are just as motivated by intrinsic motivations like helping the customer to win, and commissions will not materially improve our performance in all circumstances. This is an important area to get right for your business, and many companies are stuck under-compensating or over-compensating out of habit. Seek the help of an outside advisor to help you redesign your compensation plans if you haven’t done so in a few years. It will make a huge difference if your comp plans make sense and drive the RIGHT behaviors that will help you grow and be more profitable at the same time.
Refinance: Interest rates are still historically low right now, and every financial pro I’ve talked to in the last 60 days expects 2-3 increases in interest rates in the next year or two. Don’t miss the opportunity to lower your financing costs when interest rates are low. Do this while you can, as the opportunity may not be this attractive again for quite some time!
Leverage: Increase your leverage. By using productivity tools with your associates, including ERP, CRM, Expense Management, Tax, Financial Reporting, Lead Generation/Nurturing, Marketing Automation and other automated systems to run your business, you will gain leverage and get more done with less human intervention. Invest in training and career development for your associates, motivating them to deliver on your vision, and to perform at a high level as they deliver results. Remember, your people are ALWAYS your greatest asset and they drive profits by being well prepared to keep your customers delighted!