A business can go broke while making a healthy profit by not setting aside enough financial reserves to meet its commitments.
A major element to cash flow is maintaining healthy profit margins. Margin Management is key. You only get paid to do most things once, so if you don’t do it right the first time your profits can quickly dwindle.
Here are 4 Ways to Manage Your Margins!
- Lower $$ tied up in inventory
- Do it right the first time
- Measure everything
If you have a number of loans, then you need to consolidate them into one. This gives you the advantage of paying lower interest and one repayment. You also need to shop around to find the best interest rate. This doesn’t always mean the cheapest, so make sure the one you choose suits your particular needs. With banks becoming more and more competitive, there’s always a bank out there willing to do your loan for less. If your bank isn’t willing to match their rate, then try another.
You should never have too much stock in inventory. This has an adverse effect on cash flow, and you run the risk of being stuck with it if trends change. Always keep your inventory as low as possible, without running short and then order stock only as you need it. It’s important to run your business lean and mean – if that means you’re occasionally inconvenienced or waiting on something, then so be it. The benefits will more than compensate.
You only get paid to do most things once, so if you don’t do it right the first time your profits can quickly dwindle. For example, a mechanic who makes his money via his hourly rate will waste much of his profit on a job if he has to redo it. So taking a bit longer and doing it right once, can be well worthwhile. You’ll cut down on refunds, and develop more loyal customers. You need to think about it – is there an area where you could improve the quality of service or product you’re delivering.
Measuring and determining your real numbers needs to be applied to all areas of your business. Everything from your advertising, to the amount of phone calls you make needs to be tested and measured. When you test and measure every area of your business, you can start to identify ways to cut costs and increase profits. If you don’t know exactly how much you’re spending and how much you’re making, you won’t have a clue where your business can be improved, and you may end up spending more money in an area which is draining your funds.
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