April 21, 2023 2Profitability Management
April 21, 2023 3Profitability Management
Revenue Revenue
COGS COGS
Opex OR
With ↑ Rev
Opex OR
With ↑ Rev
April 21, 2023 5Profitability Management
• 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
April 21, 2023 6Profitability Management
• 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
April 21, 2023 7Profitability Management
Fixed
Variable
April 21, 2023 8Profitability Management
Restraining the expenses from growing further.
Money saved by change in plans or policies that reduce the expenses associated with a
business activity.
April 21, 2023 9Profitability Management
•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
April 21, 2023 10Profitability Management
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. ←
April 21, 2023 11Profitability Management
Extension of existing IT systems.
Purchase of a specialist BPA tool
Purchase of a Business Process Management
solution (BPM). ←
April 21, 2023 12Profitability Management
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.
←
April 21, 2023 13Profitability Management
←
• Low Margin Customers-
Basic Relationship management
• Key Customers
Full partnerships
• Weeding out unprofitable customer
Selective relationship
April 21, 2023 14Profitability Management
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 21, 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
April 21, 2023 16Profitability Management
Payment on due date
Inventory Strategy in place
Aggressive with past due
Do not miss any COD opportunity
Interest Income←
April 21, 2023 17Profitability Management
ROL, MOQ, Transit period
Perpetual Stock Take
Demo Policy
Slow Moving and Non Moving
Senior management review
April 21, 2023 18Profitability Management