Vrakas CPAs, Here Are Your Articles for Wednesday, September 26, 2018
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What Is the Path to Profitability?

 

How long has it been since you've taken a deep look at your business? Maybe you're focusing so much on what you need to do today that you aren't examining long-term issues that can affect your profitability. Here are some tasks that can take you where you want to be.

  • Monitor and manage your business cash flow. This is an oft-forgotten but important measurement.
  • Identify your breakeven points for your various product lines.
  • Explore business valuation services.
  • Calculate the cost-effectiveness of your marketing and advertising campaigns.
  • Figure net profit on a quarterly and annual basis.
  • Explore tax-saving strategies; there are often little-known tax breaks you aren't taking full advantage of.
  • Examine your current employee benefit plan and consider more efficient options, as well as offerings that help in employee recruitment.
  • Implement more sophisticated internal accounting systems.
  • Perform cost segregation analyses to revalue your assets and increase your cash flow.
  • Compare yourself to similar companies to see how you stack up to your competition.
  • Analyze data so you can make decisions that are better informed.

As you proceed with taking a fresh and in-depth look at your business, here are some specific tasks you can perform to start saving money right away.

  • Analyze expenses. Look closely at operating expenses that are too high based on industry benchmarks.
  • Negotiate with suppliers. The first deal they offer may not be their best.
  • Look at your margins. You may want to eliminate unprofitable products or services, so you can devote more resources to profitable areas.
  • Restructure your financing. There may be more efficient ways to fund ongoing operations.
  • Review your pricing system. You may be charging too much or too little. Take a fresh look at the market.
  • Track advertising investments. Do you know how much bang you're getting for your buck? You should calculate the rate of return for every dollar you spend on advertising and marketing to see whether you're generating enough sales and additional profits for your business.
  • Plan for profit. Every business needs a plan for future growth. A flexible business plan sets key goals and charts a course of action to improve profitability.
  • Remember the 80/20 rule. In general, 20 percent of your customers deliver 80 percent of your sales. Have you taken a close and recent look at who your most profitable customers are? Analyze your complete customer database and work out the profitability of each customer.

Although this may seem like a lot of work, the payoff can be enormous when you take a closer look at the inner workings of your company and fine-tune it to make it run more efficiently — and profitably. Give us a call and we can discuss ways we can help you get the most value out of your company.

 

 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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