As companies struggle to reduce costs, find new sources of revenue, and operate more efficiently, they sometimes forget the basics. There are 10 things that every business owner should consider as part of the foundation for making their company stronger. Below are 3 of the 10:
- Know your key drivers and manage them: Keep a careful eye on areas that affect cash flow: accounts receivable collections and inventory turnover. How are you doing compared to past performance and your peers? Watch key areas that affect profits, net and gross margins, labor and fixed asset utilization.
- Understand and use break-even analysis: Do you know your contribution margin? If not, you won’t know how much more you need in sales when costs rise or prices fall. At the same time, you’ll know how much to cut when sales fall and can analyze the need for expansion or capital decision.
- Monitor accounts receivables closely: Process invoices immediately. Distribute an outstanding accounts receivable statement weekly and take action on late accounts immediately. Start with a polite but firm personal call and don’t get off the phone without a commitment to a payment date. A few days improvement in collections will make a huge difference in cash flow.
In our upcoming Profit Mastery training, business owners will learn all 10 of these foundational items in addition to priceless tools for making their business more profitable. Interested? Click here to learn how this training will help strengthen your business.