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Monthly Archives: July 2017

Make Business Financially Fit

1. Know Your Overhead Cost – It is easy to know what the cost is of each product or service you sell, but many business owners fail to include their overhead cost when figuring their numbers.

Profitable businesses know what their profit is on each product or service after their overhead cost is included. Overhead costs often include, administrative expenses like office supplies. Other expenses may also include marketing and advertising, employee related, facilities and equipment, vehicle related expenses, insurance, and tax related expenses.

Companies should know the percentage of breakdown related to each product sold, each procedure or job performed, or each service that is provided.

This allows the business owner to price their products and services at the right price. If the overhead cost is not included, it can cause the business to lose money on each sale that they are making.

2. Manage Your Cash Flow Regularly – Cash flow is so important for a financially fit business. If a company does not have a good eye on their cash flow, it can cause them to struggle every month.

Knowing what money you have coming in, and what money you have going out each week and each month will help you to know what you need to bring in each week to manage the bills that are going out.

It will also assist you with meeting goals like buying that piece of equipment that will make you more profitable or investing the money to increase overall profitability. Look at a statement of cash flows; a statement of cash flows will show you what money is coming in and what money is going out each month.

3. Pay Attention to Your Numbers Each Month -Waiting until the end of the year to get your bookkeeping in place for your tax accountant can be a very costly mistake. A financially fit business pays very close attention to how the business is doing on a weekly and monthly basis.

They know how much they need to make each week in order to be a profitable business. They also look at their financials each month to see what they need to do in order to improve the next month overall performance.

If a company fails to do this, they have no way of making important business decisions because they don’t know where they are at. Not know where your business is at will cause your business to fail. If a business isn’t growing, they are dying.

4. Know Your Financial Ratios – Many business owners don’t know what business ratios they need to track in order to be profitable. Knowing the right ratios can help a business owner know what decisions they need to make to move their business in the right direction.

As an example, one of the ratios that a business needs to track is the current ratio. This ratio will help them track how healthy their business is. A healthy business will have at least a 2 to 1 ratio, so $2 in assets for every $1 in liabilities. If the business is carrying inventory, it is important to have a 4 to 1 ratio.

Workflow Solutions

Having Large A3 Prints

Not every company needs to print on A3 sized paper so why would you want to get one? Keep it simple and save ink and funds by using standard sizes. A3 paper uses double the amount of ink and time as that of a single A4 sheet and generally wastes a person’s time.

Single Sided Printing

Why would you waste paper by printing only on one side? You can track down who has been printing single sided pages. Make sure that you are printing on both sides of the paper to save the trees. You’ll also need to top up the paper tray less often if you think about it.

Sending Print Jobs to the Dump

Think before you ink! There are so many ways you could save paper. One of them would be to make sure that you check your document before printing it. Documents with mistakes will get tossed in the bin because a sentence wasn’t checked and corrected.

Printing with No Purpose

It would be unwise to print a document that can essentially be sent via an email. In the end the person is going to scan it to make it a digital copy to have access to the archive. Consider whether you really need to print the document or whether you can email it instead. Make sure that you don’t print everything you type or receive unless it’s absolutely necessary.

Costs of Business

Let’s say that a nameless bar and grill restaurant is selling a pizza for $15.90; we’ll start there. First let’s review some important price assumptions:

– If the seller of the pizza has applied a Keystone Pricing Model to their food sales, each pizza costs them $7.95 from purchase to sale. (50% Gross Margin)

– If our mystery company’s distributor is selling pizzas at $7.28 and they are utilizing a 30% markup, the distributor’s cost/pizza is $5.60. (23.08% Gross Margin)

– If the distributor can cut their cost per pizza by $0.05, or 0.89% of their current sell price, they’ve increased their margin by almost 3% on each pizza (23.08% vs 23.76%).

Let’s say the distributor services 60 sellers totaling $500,000 of gross pizza sales/year. That is a $3,434/year increase in gross profit for the distributor.

For the pizza seller to achieve the same 3% more margin as described for the distributor, they need to cut their COGS by roughly $0.235, or 1.48% of their current sell price.

If the seller is doing $36,000 in yearly pizza sales, they’ll see a $532 increase in gross profit by cutting their pizza expenses as suggested above.

If you don’t know your numbers, you don’t know your business.

One of the hardest parts of trying to increase profitability is understanding where to focus. People commonly want to jump headfirst into more sales because that’s what everyone talks about, sales and revenue. This is especially true when a business is failing.

By managing and planning costs you can drive profitability in a more sustainable manner. An increase in sales doesn’t necessarily create profitability, but managing the costs of your sales can.

Get a Creative Idea

Phone a friend. Sometimes a little conversational stimulation can shake things up just enough to get the creative ideas started. You can use this short chat (ten minutes is a good length to shoot for) as a mini-brainstorming session where you ask your friend for ideas (even if their ideas aren’t all that great, they may spark something inside you), or just talk about anything else. It’s an easy way of breaking the “I can’t come up with a creative idea” pattern that you’re in.

Take a walk. This is similar to number 2 up there. When you’re stuck in a creative rut, one of the best things you can do is take a 15-20 minute walk. Ideally, you’d take this walk outdoors in a natural, green setting (the color green has been shown to spur creativity), but really, almost any place will work. Taking a walk helps your creativity in two ways (and that’s in addition to the health benefits!). First, it gives you (and your brain) a change of location, which, again, is a great way of breaking a mental pattern. Second, as you’re walking, you’re pumping more oxygen into your brain. This is good. Brains like oxygen. When you feed your brain oxygen, it feeds you-ideas!

Travel through time and space. Okay, this one may sound a little weird, but a study published in the Journal of Personality and Social Psychology suggests that when a creative task is portrayed as originating from a far rather than close location (with regard to both time and/or place), people tend to come up with more creative responses. In other words, imagine solving your problem or coming up with your idea in Paris in 1910, or Hong Kong in 2050.