21 02, 2017

There are four ways to improve your cash position, but “Gross Profit” is the most important!

By |2022-06-22T15:13:43+10:0021 February 2017|

“There are four principal ways to improve your cash position. Introducing new funds, unlocking tied up cash, reducing cash leakages and generating increasing cash flows.” In every business, managing the cash reserves of that business is critical to its performance. Too many businesses tie up valuable resources in juggling cash flows and revising less efficient operational processes to suit the limited cash position of that business. The cost to those businesses is huge. And in a competitive environment, the additional costs incurred by an under-funded business will eventually cause that business to fail. Of the four methods for growing [...]

14 02, 2017

Variance analysis, the Why to support the What

By |2022-06-22T15:16:23+10:0014 February 2017|

“Successful business managers have a plan. Their management reports tell them how they are performing against that plan. Variance analysis enables them to understand WHY their results are different to the planned outcome.” At the simplest level, variance analysis assesses the difference between actual results and budgeted results. However, when applied to gross profit analysis it provides even more valuable information. There are many variables that will impact on the dollar amount of gross profit achieved. Firstly, sales volume and gross profit margin levels may differ from those that were planned for. Secondly, the cost of goods/services may vary [...]

9 02, 2017

3 Ways to Grow Your Gross Profit Margin

By |2022-06-22T15:16:29+10:009 February 2017|

“Until you have detailed information on the many elements that make up your gross profit, you will be a hostage of your business. Once you understand your gross profit margin you can start driving your business” There are three ways you can grow your gross profit: Increase sales prices Reduce variable direct costs Increase volume with the same fixed direct costs Well I am hearing a few "no shit Sherlock" comments after this great revelation. I apologise for stating the obvious but it is the simple truth. While these goals seem very simplistic, the varied strategies that are available [...]

3 02, 2017

Managing gross profit is difficult

By |2022-06-22T15:16:38+10:003 February 2017|

"Many businesses manage their overhead expenses to within an inch of their life but do not understand their cost of sales." This is often true for a very simple reason. Overhead expenses are relatively easy to understand in the context of a reporting period. Cost of sales expenses are a much more difficult proposition. There are so many factors that need to be taken into account to get a true cost of sales position. The cost of sales is often the largest cost category in a business so it needs to be understood so it can be managed. Not [...]

1 02, 2017

What does gross profit really represent?

By |2022-06-22T15:16:46+10:001 February 2017|

"Gross profit is the measure of the wealth creation (value added) process of every business. Overhead expenditure represents the cost of managing and nurturing this key resource." We believe that the accurate measurement of gross profit is the most important element of financial management. Detailed analysis of this critical measure can only be done when the accounts are set up the correct way to enable the right things to be measured. The starting point is to understand what gross profit is really a measurement of. In all but the simplest business models this can be a complex task. Business [...]