In this day and age, more than survival, businesses strive to be the best. Having a good cash flow and maintaining the same amount of revenue is not enough, businesses are aiming to become the top players in their industry.
The basic underlying process to increasing business profitability includes reducing overhead and operating expenses and increasing savings, which will in turn improve the business’s bottom line.
Here are some ways this can be achieved:
1. Manage Your Costs
This is the first and foremost step to improving business profitability indirectly. It’s crucial to cut costs without compromising on quality.
There are several ways businesses can manage their costs. These include negotiating for better prices with suppliers and requesting bulk discounts. Some suppliers offer discounts given that cash payments are made within a stipulated period.
Another way of managing costs is to carry out an activity-based costing analysis to uncover the extent of how specific business functions attribute a cost to different activities such as logistics, training, and salaries. This will help you decide the areas you can improve cost-wise.
2. Manage Your Inventory
Stocking up on inventory can result in cash being tied up in goods. Freeing up this cash can take time and delay the process of liquidation.
A ‘just in time’ system is beneficial as businesses will only stock up on the inventory they need to continue their manufacturing process, thereby decreasing inventory costs.
Paying for space utilization is also another cost that can be avoided with a reduced inventory.
3. Reduce Your Expenses
The best way to do this is to create a report of your overheads and the proportionate expenses they attribute to. Hire an accountant or a professional who can analyze this report and uncover ways to cut your overheads without sacrificing quality.
There are multiple ways businesses can further reduce their expenses such as replacing light systems with LED, thus maximizing their energy and subsequent cost savings.
These are some tips you can incorporate in your everyday business activity to increase profitability.
Other means include cost-segregation, by which you can accelerate depreciation and thus take advantage of tax reductions to boost your profit. Likewise, R & D Tax Credit will allow your business to subtract the cost of research, allowing you to benefit from a reduction in taxable income.
If you’re looking to increase business profitability, reach out toThe Darson Group. We offer services like cost segregation, R & D tax credit, and WOTC tax credit service to make your business processes more lucrative and grow your bottom line.
Contact us now to get started!