Profitability Management

April 22, 2023 2Profitability Management


Revenue Revenue

COGS COGS

Opex OR

With ↑ Rev

Opex OR

With ↑ Rev


• Assuring that each click is accounted for in the revenueRevenue Assurance

• Recognition of Revenue pertaining to a month in the same period.Timing

• Billing is complete only when money is collected.Collection

• The price of the product has to be decided in consideration with market, competition and end customer expectations.

Product Pricing

• Discounts offered to the customer flow through a series of approval as per the Metrics.Discounts


• Negotiating the purchase price with the supplier.Purchase Price

• Minimising the overheads cost of transportation freight, Insurance and other charges.

Overheads

• Effectively planning taxes paid for the purchases. Eg Promo items provided free to customers purchased against CST than VAT.

Effective Tax Planning

• Negotiating for the best payment terms with the suppliers .Payment Terms

• Obtaining volume discounts from the supplier on bulk purchases keeping in view the inventory management also.

Volume Discounts


Fixed

Variable


Restraining the expenses from growing further.

Money saved by change in plans or policies that reduce the expenses associated with a

business activity.


•Various ways through which personnel expenses and staff cost can be controlled. →

Personnel Expenses

•Business process automation (BPA), focuses on streamlining and automating the key processes that drive value for an organization and its customers. →

Process Automation

•An internet enabled, web based application that act as a mechanism for business to manage those third parties that supply goods and services. →

Vendor Management

•A corporate Level strategy that focuses on creating and maintaining relationship with customers. →

Customer Relationship Management

• Some other day to day cost saving measures that will help reduce operating expenses and increase profits. →

Others


Use part-time support staff. They don't

require benefits and usually have more

flexible working hours.

Use an outside payroll service.

Use college interns or co-op students for

research, setting up databases, etc

Have one person attend a seminar, and then later "show and tell" the rest of your

staff.

Broaden staff responsibilities. ←


Extension of existing IT systems.

Purchase of a specialist BPA tool

Purchase of a Business Process Management

solution (BPM). ←


Automate monitoring of

controls

Enable vendor managers to manage risk

Track and address areas of non-compliance

identified in the vendor assessment

process.

Measure vendor compliance to

policies and procedures.

←


←

• Low Margin Customers-

Basic Relationship management

• Key Customers

Full partnerships

• Weeding out unprofitable customer

Selective relationship


Recycle and Reuse papers and ink cartridges of printers and

photocopier

Encourage use of emails rather paper memos as mode of

communication.

Find alternatives for air flights .book ticket in advance with low tariff air

carrier

Don't overpay your income tax quarterlies. If you anticipate that your taxable income will drop this year, don't pay taxes based on last

year's income.

Fix one day in a week for employees to leave

in time to save on electricity and transportation

expenses.

April 22, 2023 Profitability Management 15

• A business must have sufficient cash to meet its obligations else it will be declared bankrupt. →

Managing Cash

• Buying too much or too little inventory can lead to problems. →

Managing Inventory


Payment on due date

Inventory Strategy in place

Aggressive with past due

Do not miss any COD opportunity

Interest Income←


ROL, MOQ, Transit period

Perpetual Stock Take

Demo Policy

Slow Moving and Non Moving

Senior management review

Profitability Management

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