Operating Cash Flow and Net Income | Bell Partners

Net Profit – It’s not the same as the cash in your bank!

Your net profit is your final bottom line profit figure. It is the overall measure of profitability. Not to be confused with cash though, remember even a profitable firm can run short on cash.   We have discussed strategies around improving revenue and associated costs the other component to consider is your expenses. Expenses are your costs that are not directly tied to revenue, think office expenses, professional fees and administrative staff. It is worth having a check of what is being coded to the accounts sitting in this category. Any variable costs such as direct labour or materials should be moved into cost of sales. As you grow and more people are making spending decisions, it is easy to end up paying more than you need for things or even paying for what you don’t need. With so many options and technology constantly changing the landscape, a regular review will help keep these expenses down. Below are some common methods many businesses can make use of to cut costs:

  • Make use of VoIP technologies In some instances (and it is becoming more and more common) a video call using something like Skype or Google Hangouts will be just as acceptable as a face to face meeting. This can massively cut down on your travel and accommodation spend as well as cutting out non-productive hours.
  • Make use of free cloud-based software like Gmail and Dropbox It’s free! Make use of it if while you can.
  • Keep your staffing solution flexible This doesn’t have to mean zero-hour contracts. Hiring contractors if there isn’t a steady stream of work or part-time staff who might be more inclined to work overtime during a busy period. These are the things that keep you better able to respond to changes and stop you paying for staff to twiddle their thumbs.
  • Go paperless Unless you are bound by laws or regulation to print words on a sheet of paper and store it in a cupboard somewhere, stop doing it! It’s old fashioned, kills trees, costs money and is generally inefficient.
  • Collaborate with other small business Pool together resources to improve purchase power, get bulk buy discounts and share resources. There are also learning benefits to working with other businesses in this way.
  • Buy second hand and sell unused Online sites such as eBay make this an easy way to lower your costs.
  • Review your marketing spend Make sure it is still relevant and your message is getting across to your customers in the most efficient way. Studies show inbound marketing techniques such as SEO and blogging are proving much more effective than traditional outbound techniques such as canvassing and cold calling.
  • Shop around for better rates Interest rates, insurance, utilities, phone, the internet. All of these could be negotiated down. Always go with the mindset: if you don’t ask, you don’t get!
  • Be green Energy saving equipment and small changes as simple as turning off monitors and making use of natural light can all add up to substantial savings.

Source: This article was originally produced by FUTRLI – the all in one forecasting and reporting tool.

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