Profitability Management Profitability Less 1162022 Profitability Management 2
Profitability Management
Profitability Less 1/16/2022 Profitability Management 2
Profit Maximisation Revenue COGS 1/16/2022 Profitability Management Opex OR With ↑ Rev 3
Revenue Management Revenue Assurance • Assuring that each click is accounted for in the revenue Timing • Recognition of Revenue pertaining to a month in the same period. Collection Product Pricing Discounts 1/16/2022 • Billing is complete only when money is collected. • The price of the product has to be decided in consideration with market, competition and end customer expectations. • Discounts offered to the customer flow through a series of approval as per the Metrics. Profitability Management 5
COGS Management Purchase Price • Negotiating the purchase price with the supplier. Overheads • Minimising the overheads cost of transportation freight, Insurance and other charges. Effective Tax Planning • Effectively planning taxes paid for the purchases. Eg Promo items provided free to customers purchased against CST than VAT. Payment Terms Volume Discounts 1/16/2022 • Negotiating for the best payment terms with the suppliers. • Obtaining volume discounts from the supplier on bulk purchases keeping in view the inventory management also. Profitability Management 6
Operating Expenses Fixed Variable 1/16/2022 Profitability Management EACH COMPONENT OF COST IS MOVABLE, FIXED AS WELL AS VARIABLE 7
Cost/Expense Management Restraining the expenses from growing further. Money saved by change in plans or policies that reduce the expenses associated with a business activity. 1/16/2022 Profitability Management 8
Opex Management Personnel Expenses • Various ways through which personnel expenses and staff cost can be controlled. → Process Automation • Business process automation (BPA), focuses on streamlining and automating the key processes that drive value for an organization and its customers. → Vendor Management • An internet enabled, web based application that act as a mechanism for business to manage those third parties that supply goods and services. → Customer Relationship Management • A corporate Level strategy that focuses on creating and maintaining relationship with customers. → Others • Some other day to day cost saving measures that will help reduce operating expenses and increase profits. → 1/16/2022 Profitability Management 9
Management of Personnel Expenses 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. 1/16/2022 Profitability Management ← 10
Process Automation Extension of existing IT systems. Purchase of a specialist BPA tool Purchase of a Business Process Management solution (BPM). 1/16/2022 Profitability Management ← 11
Vendor Management Automate monitoring of controls Enable vendor managers to manage risk Track and address areas of noncompliance identified in the vendor assessment process. Measure vendor compliance to policies and procedures. ← 1/16/2022 Profitability Management 12
Customer Relationship Management • Low Margin Customers- Basic Relationship management • Key Customers Full partnerships • Weeding out unprofitable customer Selective relationship ← 1/16/2022 Profitability Management 13
Others Recycle and Reuse papers and ink cartridges of printers and photocopier Encourage use of emails rather paper memos as mode of communication. Fix one day in a week for employees to leave in time to save on electricity and transportation expenses. Find alternatives for air flights. book ticket in advance with low tariff air carrier 1/16/2022 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. Profitability Management 14
Working Capital Management Managing Cash • A business must have sufficient cash to meet its obligations else it will be declared bankrupt. → Managing Inventory • Buying too much or too little inventory can lead to problems. → 1/16/2022 Profitability Management 15
Cash Management Payment on due date Inventory Strategy in place Aggressive with past due Do not miss any COD opportunity Interest Income ← 1/16/2022 Profitability Management 16
Inventory Management ROL, MOQ, Transit period Perpetual Stock Take Demo Policy Slow Moving and Non Moving Senior management review 1/16/2022 Profitability Management 17
Thanks 1/16/2022 Profitability Management 18
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