Financial health is about more than just money coming in and out. It’s about managing that money effectively with the help of a CFO.
Now more than ever, profitability is the measure of a successful business. However, profitability and making a profit aren’t the same thing. Profit is the amount of revenue a company brings in minus the company’s expenses. On the other hand, profitability is a more relative statistic, based on profit in relation to size and efficiency, and is a reflection of the general and long-term health of the company. A company can earn a profit and not be considered profitable, which means that its future is uncertain.
Keep in mind that your company cannot be successful and profitable without careful financial planning and cash flow management. If you are better suited to the entrepreneurial side of your business, and hesitant about doing your own financial analysis, you might need to make use of a company that offers you virtual CFO services.
In the short term, let’s look at easy ways in which you can reduce costs and increase cash-flow.
- Cut obvious costs & overheads – think basic, everyday expenses like electricity and office supplies. Shop around for bulk suppliers, or a courier company that can offer you a better deal on your deliveries.
- Consider outsourcing or remote work – Outsourcing certain aspects of your business such as accounts or marketing will cut your staff costs, and give you access to expert advice and services. Allowing staff to work remotely could also cut office overheads and save on transport.
- Take a look at your product costing – are you charging too much or too little for your products or services? Either one could be a problem. Charge too much and your competitors have an advantage. Charge too little and your business won’t be profitable.
- Negotiate with your suppliers – it pays to negotiate the best possible price for your materials. Also explore options such as buying in bulk if that is feasible for your company.
- Take a step back and get a professional opinion. Business owners and entrepreneurs are often too closely involved in the day to day running of their business, and have dedicated so much of their time and passion into their venture that they can’t see the wood for the trees. A business or financial consultant will have a better overview and will notice operational flaws that you might overlook. Many entrepreneurs are making use of a virtual CFO, as this allows them access to expertise without the cost of a permanent hire.
Running your own business can be complex and challenging, especially juggling the stresses of your day-to-day operations with long term planning and goals. Profitability and optimization are the key to longevity, but these need planning and strategic implementation. At Outsourced CFO we can assist with a business analysis as well as financial management, in order to help you with building long-term profitability for your business. To read more on what we can do to help you keep control of your cash, click here.