For a business to maintain operations, provide better services, and come up with new products, it needs to make a profit. In any business, profit is always accompanied by certain losses. The key is to ensure that profit and loss management is done correctly to help businesses stay afloat and better yet, thrive.
What are Profits? What are Losses?
A profit is an amount of money that is more than its original price. On the other hand, a loss is an amount of money that is less than its original price.
In business, we say one makes a profit when the business makes money or experiences a return of investment (ROI). A business experiences a loss when it doesn’t make money on a product or service but loses part of more than what the owner initially invested.
Profit is making money.
Loss is losing money.
What is Profit and Loss Management?
Profit and loss management is managing income (incoming cash flow) and expenses (outgoing cash flow) to ensure that a business earns a net operating profit.
Usually, profit and loss management deals with profit and loss reports (commonly called P&L reports). You can compare it to a report on how the financial aspect of the business is doing or performing. It helps determine how profitable a business venture is or in the case of P&L projections, how profitable it will be.
Profit and loss management is crucial to help a business stay afloat, project and strategize for its future and improve its performance. By comparing profit and loss forecasts with the actual performance of other companies—preferably competitors or role models, a business can identify areas they need to focus on or improve on. For example, is the business spending enough on research and development to ensure that they can stay one step ahead from their competitors? Are they spending too much on expenditures?
All of these considered, we have come up with three ways for you to do profit and loss management right:
1. Monitor Profit and Loss Reports Constantly
P&L reports are generated on a weekly, monthly, quarterly or annual basis based on a company’s standard operating procedure. However, accountants can generate reports as needed and requested by the management. Take advantage of this and constantly look at the numbers. Look for trends and use them to forecast and project profits and minimize losses.
According to an article on business.org, a P&L chronicles a company’s fight for financial survival, as well as the results of that competitive struggle, during a specific period (quarter, month, or fiscal year). A company’s P&L data shows indicators like revenue, expenses, and net income, or net loss if expenses exceed revenue. Revenues range from operating earnings and interest income to cash generated on investments or in joint ventures with other establishments.
The reports alone can help you make informed business decisions to help your business maximize profits.
2. Combine Monitoring of P&L Reports and Cash Expenditure
Cash is still king, no matter the business type or size. Effective money management shows how a company saves money, grows its existing cash, and averts financial meltdown. This should be managed or controlled efficiently. Expenditures (outgoing money or expenses) should be monitored.
Combined with P&L reports, this helps a business save money during lean months, and have spending power on strong months to invest in new business products, infrastructure, technology, manpower or any aspect that is needed for business growth.
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Developing a business strategy that combines these two will result in effectively managing business income and helps the company “feel” profits when they come in.
3. Outsource Team for P&L Management
It can be hard to generate P&L reports especially when there is too much red tape in the organization. It can also be challenging to do projections on it if you are too involved or immersed in the company. You tend to prefer to stick to gut instinct when making analysis.
Partner with a finance and accounting solutions partner to build a team of bookkeepers and certified public accountants to generate reports strictly from an accounting point of view could give a manager a different perspective. The team can also help develop a business strategy formula to help a business owner understand how to increase or make more money.
There are a lot of factors affecting the profitability of a business and profit and loss management is just one aspect. Effective business strategies, cash managements, maximizing profit and loss based on the company’s strengths are examples of how a business can save money, make money and lessen losses. No matter how much cash a company has or how many assets it owns, losses extending over long periods of time will weaken the value of its assets, decrease its cash holdings and drive it to bankruptcy. Profit and loss management will help a business prevent substantial business losses from happening if done right.
Managing your business’ finance and accounting on your own is taxing and does not always result in favorable results. With our customized solutions, rest assured that all your concerns would be addressed accordingly and at the same time, it would allow you to concentrate on other important factors vital for your company’s growth. Learn more!
Information Security Means Better Business
In the progressively competitive business world, information is a valuable resource that needs utmost protection. Information security is integral in managing your business and ensuring that vital information is not compromised in any way.
A reliable and efficient order processing system for your customers is crucial to business success. Without it, backroom operations will fumble, front end representatives will suffer, and customers are more likely go to a competitor that offers better service. A lot of time, money, and resources can be saved just by developing a proper order-processing guideline. It’s important for you to come up with the best procedure that will help you run your business smoothly and your customers happy.
Here are a few tips to keep in mind when processing orders:
1. Use a Standard Order-Taking Form
Using only one form will eliminate any confusion both internally and externally. It doesn’t matter whether a customer service representative takes the order over the phone, or a client directly fills out a form on your website, a standard form should be used. This way, whoever fills out the form knows what information is needed, and makes sure that all pertinent information is gathered. Some order details might vary depending on the item, such as options to choose color palettes, volume, or size. Make sure these details are included in the standard form so everyone will literally be looking at the same page.
2. Do not Accept Incomplete Order Forms
If all the needed information is not collected, there will be delays in processing it because there is a need to verify what exactly is required in the order. This will cause backlogs and will waste a lot of time. To avoid having to go back and forth between clients and backroom operations, the should be a system that makes sure the order form is returned and completed before it is processed.
3. Confirm the Order with the Customer
Confirming the order means that you’re acknowledging that the order forms were received, and that you’re about to process it. You may send an email that includes the order details, your contact information, and any other pertinent instructions as needed. Make it clear that the customer should reach out to you if there are any problems. You may opt to require the client to verify the order, but it’s often not necessary; your acknowledgment is what matters.
4. Circulate the Filled Out Order Form Internally
This is the time to distribute the order form to the departments and individuals who will perform any action connected to carrying out the particulars of the order, such as the finance team, backroom operations, manufacturers, depending on the nature of your business. It’s important to communicate with everyone concerned what the fulfillment dates are so that they know what to expect, and how best to keep within the timetable allotted.
5. Let the Customer Know About the Order Status
Clearly communicating with customers throughout the process is important. Keep them up to speed as to what the status of their order is. If there are delays or problems, let them know immediately instead of keeping customers in the dark. Give them the details of the order once it ships: tell them who the carrier is, what the tracking numbers are and the expected date of delivery.
6. Ask for Customer Feedback
After the customer receives the order, take the time to get some feedback. Many businesses skip this step, but it’s one way of knowing your client’s sentiments and getting insights into what needs to be improved with your order processing system and inbound call center services. If a client is delighted with the service, then this is also valuable feedback that let’s you know you’re doing the right thing. Having a customer service representative call after doing business is also one way of letting clients know that you value their opinion, thereby increasing the likelihood of them doing business with you again in the future.
Take the time to develop the best order-taking system that works for your customers and backroom operations. This way, it will be smooth sailing for your business and your clients remain satisfied and loyal.
Having a reliable contact center is a vital aspect of a business regardless of the industry they belong to. It must have several communication channels where customers can freely address their concerns and queries regarding the company’s products and services. With our results-driven solutions, you can expect your contact center to deliver the best responses your clients are looking for. Learn more!
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