Get an accurate view of the profitability of each of your customers by factoring in discounts, promotions and other charges that reduce true gross profit levels. You need to know how much you are really making on your larger volume customers.
Know what your customers really want.
Be sure that the products that you are making or buying-in are the right ones for tomorrow’s sales orders. Keep close tabs on sales activity – what is selling and what is not selling. Declining sales on any product line can mean changing customer needs. The sooner that you react to these changes the better chance you have of not wasting resources.
Flag low-profit orders.
If your sales margins are way off-target then your business profitability plans will probably also be way-off target. Establish systems that alert you to deals that fall below your minimum profit requirements before they happen.
Get your pricing right.
Don’t rely on “gut feelings” or stories from your salespeople to make pricing decisions. Different customers will value your products and services differently. Smart companies look at their marketplace and identify their most profitable customer segments. They do cost-to-sell and cost-to-serve analysis. They also have processes and a single customer database that help identify their marketplace’s purchase and price drivers.
Monitor your inventory.
Run ageing reports regularly to keep on top of how old your inventory is. Analyze the turns and identify slow-moving and obsolete inventory. Shift it quickly before it becomes worthless.
Treat your suppliers as partners.
Make sure that you have systems in place that enable you to evaluate and monitor supplier performance. Try to build strong and mutually profitable relationships with your key suppliers. Avoid battering them down to the lowest possible price. This will only result in you being classified by them as a low-value customer. In turn this makes it far more difficult for you to achieve the extra service levels that you may sometimes need from these suppliers.
Match sales order demands to inventory and production.
Your inventory and your production schedule should reflect the sales orders that you have in process. When your reports don’t match you need to identify the bottlenecks and out-of-sync situations so that you can correct them before promised delivery dates start to slip.
Reconcile RM consumption with FG production.
Raw Material costs are a significant component of your finished goods cost. Track Raw Material consumption against Finished Goods production information on a regular basis. Identify excess usage of Raw Material and track them to vendor who supplied, product that was produced, production supervisor that was responsible, production process that consumed more than normal, machine that was used and take corrective actions. Even a few %age points saved in RM cost can mean a significant increase in your bottom line.
Get invoices out faster and accurately and improve cash flow.
The key to improving cash collections is to get invoices out the door in the shortest possible timeframe without errors and then follow-up promptly. An automated billing and cash collections process with in-built system alerts will help you achieve this and eliminate cash-flow problems.
Track all credit notes issued.
The number of credit notes that your business issues directly measures how well or how badly your business processes are working. Wrong goods, wrong prices, wrong discounts or whatever, the process of correcting these mistakes certainly costs you a lot of money. Monitor credits, categorize them, analyze them and then focus on the problem areas in your business that causes them. Targeting improvements in these specific problem areas will save you time and money as well as dramatically improving customer service.
Is the business information you are getting accurate and timely?
Your business decisions can only be as good as the information that you base them on. To assist you in making the right decisions the fully-integrated SAP® Business One software solution has been designed to put all your business critical data in one place – at your fingertips with just a few clicks of your mouse. Even greater control comes from other embedded features, including:
Work-flow based alerts trigger actions on specific business events.
Exception management automatically detects, logs and reports on events that you specify.
Perhaps the best tip that we can give you for improved profitability is to find out more about Inecom and SAP® Business One today.