Top tips for better profits
Announcement posted by FCR (Financial & Corporate Relations Pty Limited) 16 Aug 2012
Even profitable businesses may fail if they cannot raise the finance to cover money tied up in outstanding invoices - and yet the cost of an overdraft or other form of finance may erode your margins. Furthermore, many traditional providers want to see profitability as a pre-requisite for providing finance in the first place.
Greg Charlwood, Managing Director, Bibby Financial Services Australia, said, “In the current tough environment, we are advising our clients to give additional focus to maximising their profit margins. Business bankruptcies are rising, with ASIC statistics show that 1123 companies were placed into receivership in February 2012 – the highest number on record since the statistics were introduced in 1999, with the majority of these being small businesses with fewer than 5 employees. Our Bibby Barometer Small Business Survey, published in April 2012, found that small business expectations for a healthy business environment had declined by 6% over the previous six months - based on intention to invest in the business, expectations of sales growth, ease of managing cash flow, business confidence and levels of business stress. “
In order to help business owners and managers strike the right balance and maximise profit margins, Bibby Financial Services has developed the following top tips:
(1) Reduce operating costs – look at where your business spends its money in producing its product or service, e.g. travel costs and stationery. Set up regular cost-reduction forums and consult with your staff on ideas. Are there any areas that can be cut back without having a negative effect on profits?
(2) Review your supplier base – is the business paying for external suppliers to provide a service that could be carried out more cost effectively internally? Can you consolidate your suppliers?
(3) Reduce cost of financing - consider ways to improve cash flow to reduce your cost of financing, since the longer debt remains outstanding, the longer it has to be financed through overdrafts or other mechanisms. Consider using debtor finance to reduce your accounts receivable cost and cost of finance.
(4) Learn to negotiate – talk to your key suppliers and ask about early settlement discounts or loyalty bonuses. According to our recent Bibby Barometer Small Business Survey, 45% of businesses surveyed offered this facility to customers with a discount in the range of 3-6% the most common. If you don’t ask, you don’t get!
(5) Shop around – research your supplier’s competitors and find out what prices they charge and what discounts they are prepared to offer.
(6) Buy in bulk – consider buying raw materials and supplies in bulk at a cheaper price per unit. Where possible, consider pooling resources or join a bulk-buying group with any other business owners to get even better discounts.
(7) Diversify your product range – try to sell new lines to existing customers as well as attracting new ones by adding to your product range. Trim your range of non-profitable products to focus all your energies on the profitable ones.
(8) Minimise the risk of bad debts – bad debts erode hard-earned profits very quickly, so it’s important to safeguard your business. Consider a reputable business debt recovery agency to work on any delinquent debts to give you piece of mind.
(9) Know your worth – are you charging enough for your products or services? Review your pricing to ensure that you are keeping up with inflation and your competitors. Build value in the minds of your customers through marketing and promotional activity, and show other ways of using your product or how it will directly benefit the bottom lines of their clients or their businesses.
(10) Work smarter – investigate whether marketing or promotional funds can go further. Track the return you are getting on your activities. Are there complementary firms or organisations that you could pool marketing spend or resources with?
(11) Consider sales incentives – look at ways to incentivise staff or customers who exceed sales targets or introduce new customers. Often internal sources will be the most cost-effective channels for new business
Mr Charlwood said, “Running your own business is one of the most exciting, challenging and rewarding things that you can ever do and requires motivation, entrepreneurial flair, determination and creativity. In order to be successful, it is vital that you know how much your product or service is worth and manage the fine balancing act between charging your customers the right prices and making enough profits to meet your revenue and profit targets,” he said.
ENDS
Media contacts
Rebecca Murray, FCR: t (+612) 8264 1002/ +61 423 338 005
Andrew Briggs, Bibby Financial Services (Aust): t (+612) 9310 8921/ + 61 403 096 807
Bibby Financial Services is one of the world’s leading global debtor finance specialists (also known as invoice finance, factoring, cash flow finance and invoice discounting) - a flexible and accessible cash flow funding tool for small and medium sized businesses. With over 6000 clients in 14 countries worldwide, Bibby Financial Services is part of the Bibby Line Group, a family-owned business-to-business services group with origins in shipping dating back over 200 years to 1807. Debtor finance is designed to improve business cash flow and support business growth by releasing cash tied up in unpaid invoices. Unlike other funding arrangements, no real estate security is required, making it more accessible for small and medium sized business owners. Bibby Financial Services Australia has grown dramatically, in recent years at an average 20% pa, due to increasing awareness of debtor finance as a smart choice for improving the cash flow, and a commitment to providing flexible, tailored solutions quickly. It now serves clients nationally, via a network of offices in Sydney, Melbourne, Brisbane, Perth and Adelaide.
For more information on Bibby Financial Services please visit www.bibby.com.au