Finance Systems Business Part 1 of 7 Business Growth Strategies
In a seven-part system, many would put Finance systems at no 7. I put it as number one because how you set up your finance systems determines everything. For example, a client recently asked me to help with their online marketing. They wanted search engine optimisation to show up at the top of the search engines such as google, Bing, YouTube to get more business leads. To be effective, I had first to identify each offering and each of the business units from within the business as they did not categorise them. I then had to determine which categories and product groups were profitable and which were not so profitable. Without analysing the finances and setting up the correct finance systems, you're effectively driving a bus on a long journey through a
desert without knowing how much fuel is in the tank.
If I started marketing products that were not profitable, I would make the business financial issues even worse. Once I had identified the key most profitable products, I was able to start the marketing process. Just as all roads lead to the gas station, all roads lead to the finances, cash flow, gross revenues or sales, the direct cost of sales, gross profits or contribution and your overhead.
A good understanding and organising of your business finances is the most straightforward way to increase your profits substantially. And you can do this without making any additional sales. When organised finance systems and analysis give you power within your business, I see clear insights into your business; it will show you directly what is working and what isn't working is a perfect measurement and control of your business performance and the correct information for the planning process.
Setting up your business finance systems the correct way will give you a far-reaching, versatile, powerful tool to drive every aspect of your business has a business manager, you need to be versatile with your finance tools. So you got your profit and loss statements, balance sheets, cash flow statements, operating budget, and key ratios. So P&L is the accountant's favourite tool they're most interested in, especially for layering because they can assess your depreciation your provisions and ensure tax liabilities in the year.
FIN DOUT HOW WE CAN HELP YOU SUBSTANTIALLY INCREASE YOUR PROFITS WITHOUT MAKING ONE MORE SALE
They are your revenue, your direct costs of sales and your overhead. In this example, a business has a gross sales or gross income of $1,000,000, and a direct cost of sales is $500,000 giving a gross profit or contribution of $500,000, which is 50% of gross income. Then an overhead cost of $413,000 giving a net profit or bottom line of $87,000, which is 8.7% of Gross sales.
If we change the 3 key numbers by 5%, & double your profits. Reduce direct cost of sales & overhead by 5% & increase income by 5%, we get a gross revenue of $1,050,000 & direct cost of sales of $475,000, giving a gross profit or contribution of $575,000 which is 55% of gross revenue. Less overhead of $392,350, leaves a net gain or bottom line of $182,650 an increases of $95,650, which is 110% of the previous year at 17.4% of gross revenue 100% improvement 8.7% net profit.
Talking about the numbers, because it's so important that we get the numbers organized in a way that works for the business owner
and the business management team. So did you know that there's what I call refer to them as the 'Three Key Numbers' or
'Three Magic Numbers'. And did you know that there are THREE NUMBERS, that if you can change them by as little as 5%, you
can DOUBLE YOUR PROFITS
If all you did was restructure your Finances Differently, So You Can See clearly your sales in each division against your direct cost of sales and your overhead you will see more clearly what is going on in your business. You wills ee instantly trends and what is performing and what is not. here you have the opportunity to ratchet your profits as if you had gears to leverage your profits. all you need to do is focus on which areas are generating your bottom line.
Talking about the numbers, because it's so important that we get the numbers organized in a way that works for the business owner and the business management team. So did you know that there's what I call refer to them as the 'Three Key Numbers' or 'Three Magic Numbers'. And did you know that there are THREE NUMBERS, that if you can change them by as little as 5%, you can DOUBLE YOUR PROFITS.
And once you know the power of this and how to use this information, and address it across your business or your business units, not only will you know how to improve your business, quickly, you'll know how to manage a very large business, no matter how big and complex it grows, you'll always be able to keep absolute on top of it and be able to see it. And this could be useful for obviously, than just managing the business and improving it but also from a SUCCESSION PLAN. So if you want to start easing off and RETIRING a bit more, spend a bit more time on your boat, or, you know, out hiking or whatever, if you have a good understanding of this, you can manage your business from anywhere and keep an eye on it. And it will give you a FRAMEWORK in which you'd be able to hand the business over or IMPROVE it ready for a SALE, because you'll be able to prove to people what's going on with the business and why it has a certain value, and why the value will continue to climb and not be at sort of the luck of the gods, as we say, you know, the Oh, it was a bad month or whatever, where you'll be able to show exactly what's going on. And there'll be none of that. Well, what if this What if that, you may say, Well, we've got a set course and a plotted map. And this is where the business is going. Did you know that most business owners take an overview of finances and don't know which units are making most profits and which are losing money? This is not an untypical small business. You can't be an expert on everything. Remember, you started your business good, you're an expert, something specific, you could do it really well. And you're good at getting customers etc. You can't do it all; many business owners say are the accountant takes care of that. But you got to remember; the accountant only cares about two things or three things liability, the right taxes are really leading Max's liability, and his p&l, and the end of year returns or monthly returns. Because this is what earns his money during the end of the year returns in the interim advisory services. That's his money. That's it; anything else he really isn't
his primary concern. So you'll find that your accounting is usually set up to suit what he wants to get done, not necessarily what you want done. And that's why we show you how to address your finances in a way that you can manage your business in a powerful way. This is essential. If you want to take command of your business. This is why I usually start really with the finances. And from this, we identify what parts of your business need attention. So if you hired me just to do your marketing and SEO, I'd probably want to look at the finances first. Maybe you already on top of this, that's fine. And you can tell exactly what needs doing no problem it's a quick process to go through really identify which direction this business needs to be steered in. Once we know our target, we know our direction, then we can start planning the business from there. So the first thing we do is would meet up to 45-minute free business makeover consultation where I promise I'll find your profits in your business during that meeting. And at least two parts of your business that need attention, you'll learn about your business and get to know how I operate. And from there, we can decide how to go.
Business Financial Plan Secrets every Business needs to Know Business Consulting Wellington
Watch our 7 part series on business growth strategies See Video No 1 called 'Finance Systems Business Consulting Wellington'
Publishers and advertisers can decide how to present their content and what technology vendors to use, all while maintaining and improving key performance indicators.
Publishers and advertisers can decide how to present their content and what technology vendors to use, all while maintaining and improving key performance indicators.
Publishers and advertisers can decide how to present their content and what technology vendors to use, all while maintaining and improving key performance indicators.
Publishers and advertisers can decide how to present their content and what technology vendors to use, all while maintaining and improving key performance indicators.