11 simple ways to boost your profit levels

Barely a day goes by without business scrutiny of a government policy decision that directly or indirectly impacts them.

 

Just this week we’ve seen employers push for the slaying of the “sacred cow” weekend penalty rates for staff and businesses fume at the rather regressive idea that Australia should have to cut its commitment to research and development in order to fund a potential company tax cut.

 

With figures out this week that show trading conditions are wallowing at a three-year low, it’s understandable why businesses should fret over the cost of regulatory compliance.

 

However, it’s important to not overlook the many things that entrepreneurs can do within their businesses to improve their fortunes.

 

Many firms, it seems, could do more in key areas such as online sales – as a recent report highlights – and pricing, with our recent analysis showing that around 75% of Australian businesses are using outdated, crude methods that do little to improve margins.

 

Greg Charlwood, managing director of Bibby Financial Services Australia, says that rising business bankruptcies – official stats show a record 1,123 companies were placed into receivership in February 2012 – should place a greater focus on boosting profitability.

 

“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,” he says.

 

“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,”

 

So how can you fatten up skinny profits without hoping for outside intervention?

 

Bibby has put together 11 top tips on how to push yourself further into the black.

 

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.