As an accountant said many years ago, “A business without cash, is not a business.” This concept is constantly reinforced by your bank and creditors.
There are very few businesses which can operate for any length of time with a poor attitude towards the costs of running their business. If they do, their profits, instead of being available for the business owners, are used up paying for unnecessary costs. If the business runs out of money, insolvency and all the associated negatives are a natural outcome.
Identifying the Profit Robbers in your business will vary from business to business and industry to industry. In the consumer environment for instance, stock theft and leakages are a major problem. Returned and damaged stock, or stock that is sold which has proven not to be merchandisable or unsuitable for the customer’s needs, is another problem.
For a commercial business, especially those that extend credit, fraud, slow payment and bad debts are the obvious Profit Robber factors. Less well understood Profit Robbing factors, are those caused by sending out the half-completed invoice, or those without proper authorisation, or to the wrong address.
Other Profit Robbing factors which affect your business’s bottom line, include a lack of:
1 focus on selling properly with the right documentation and terms to the correct trading entity;
2 proper due diligence on new and existing customers;
3 maintenance of up to date customer information;
4 processing and sending out a properly completed invoice, with all the correct information, to the location specified by the customer;
5 understanding that technology will not solve all problems, and technology just changes the types and nature of problems which will be experienced;
6 appreciating that quality employees are required to keep customers happy;
7 addressing the causes of repeat mistakes, etc.
During the good times, many of the negative effects of these factors are minimised or ignored because they can be hidden by perceived profits through creative accounting, cheaper finance options, slow payments to creditors and the potential of further sales. Obviously, in bad times when sales slow down and creditors become more demanding for payments, the negative effects of Profit Robbers cannot be so easily hidden.
It now appears that both the Australian and global business environment are on a downward spiral. In such circumstances, sloppy business practices which create and perpetuate Profit Robbers in your business can no longer be tolerated. Your focus therefore must now be on making every sale as profitable as possible by eliminating Profit Robbers.
If you are serious about staying in business, especially during poor economic times, among the key factors is making every sale count, to value cashflow and secure profitability. Making sure every sale is as profitable as possible means maintaining a positive attitude towards eliminating Profit Robbers. This is a must. If you run out of cash, as the old accountant said, you will not have a business.
As our new tagline states, Credit Matters is an ideal source of information on understanding and eliminating Profit Robbers. Whether you access the free information on the Credit Matters website, or contact Kim directly, it’s very important that you act now to eliminate the Profit Robbers of your business. The sooner you act, the better it will be for your business, stakeholders, and equally important, for you and your family.