As small businesses reset for the new year, it is the perfect time to make a real change. Organisations assessing their net profit position regularly is critical. As part of a Business Health Check, adjusting a few key areas can make a massive difference in the profit position of any company. Working with a certified, professional ActionCOACH business coach, your business can start the year off right.
As part of a comprehensive review of your business practices, processes, and systems, we can help guide you through a transformation and reinvention of your business. ActionCOACHes are not consultants and wouldn’t leave you with a laundry list of ‘To Dos’ and then disappear. We will partner with you to make real changes and get you real results.
The first steps of any good health check must be securing your net profitability and increase collection of your receivables
- Create an Accounts Receivables aging report
- Know your ART Ratio; Net Annual Credit Sales ÷ ((Beginning Accounts Receivable + Ending Accounts Receivable) / 2)
- Be proactive; Don’t wait until they are late
- Move swiftly on past due accounts; Send reminders and notices on time
- Consider offering a discount for early payments
- Consider offering a payment plan; break up obligations into manageable amounts
- Work with your banker to get cash management options
- Make it easy for your vendors and suppliers to pay; Offer multiple ways to pay
After you have maximised the cash coming into your business, reducing cost of goods sold will help improve profitability as well. Some areas to reduce COGS for your business include the following.
- Consider buying in bulk
- Start bargain hunting
- Substitute lower cost materials if possible
- Leverage suppliers
- Negotiate vigorously
- Reduce waste and rework
- Automate whenever possible
- Move manufacturing if necessary
Finally reducing direct costs will also lead to higher profitability. Here are some ways we can pursue.
- Reduce labour expenses
- Upgrade or retire equipment
- Make material changes in production
- Scrutinise your inventory management processes
- Streamline all logistics
- Improve supply chain relationships
Once your organisation is in a more secure net profit position we can move to the next step of the business health check – business growth.
Moving towards improved profitability will give you confidence that the changes you are making will allow you to transform your organisation into an enterprise that works for you. Remember it’s a new year filled with new possibilities. Reach for them all.
