Wednesday, 22 October 2014

Besides meeting the monthly payroll, drive your SME to make profits.Drive Hot News

The constant thought of whether you will have ready money to pay salaries every month is one of the biggest preoccupations of many business owners. PHOTO | FILE
The constant thought of whether you will have ready money to pay salaries every month is one of the biggest preoccupations of many business owners. PHOTO | FILE 

Far too many SME owners are more worried about making the payroll and not their profits.
The constant thought of whether you will have ready money to pay salaries every month is one of the biggest preoccupations of many business owners.
The number one reason many business owners lag behind in profitability is that they do not have the answers at hand. They simply do not know their numbers.
Many business owners have no idea whether they made a profit last month or a loss. This means they are constantly chasing the payroll money.
It is worse for those business owners who do not pay themselves a salary and look forward to a cash drawing to meet personal or family expenses.
Assuming you have school fees, insurance, house rent or mortgage to pay, many business owners find themselves in a difficult situation.
I know of many business owners with a very decent monthly turnover who constantly do not have cash to expand their businesses.
MANAGEMENT TOOL
This is because they are either breaking even, or trading at a loss. They have debts or expenses to service, too, and this keeps eating into the business funds without the clear knowledge of the business owner.
Business owners who focus on their numbers tend to have some form of accounting background or experience.
Many SMEs depend on accountants to give them critical information but few are lucky to have proactive accountants who spend time doing analysis and helping the business owners understand what is going on.
Many accounting systems available at the disposal of SMEs do not provide quick snapshots.
As a business owner, you need to know the difference between profitable and “busy”.
If you wait until year-end to get your financial reports for audit or income tax purposes, you will continue losing money being “busy” yet not sure whether you are profitable.
I will recommend that every SME owner invests in a business management tool that allows them to see realtime their income, expenses and profitability for any given period.
We all know that income minus expenses gives you the gross profit. The trick to boosting profits is always increasing income and decreasing expenses. We are a cash society and many SMEs hardly track cash expenses effectively.
If you are making 80 per cent of all income for to your business, you should be directly benefiting from 80per cent of all expenses incurred by your business.
If your payroll is the highest cost-item per month, and your employees are contributing only 20per cent of the income, place some jobs on the line.
Consider outsourcing specialised tasks or hire part-timers for roles that are not busy. Saving a few thousands per month can make a big difference.
Look out for underutilised resources that have long-term contracts. Review your office space utilisation, telephone contracts, Internet bandwidth and other recurrent expenses.
COMPLEMENTARY SERVICES
If anything is underutilised, figure the best way to get value for your money. Overall, think through the different ways you can use to reduce the money that leaves your business.
To boost your income, consider introducing complementary products or services. Say you provide printing solutions for branded merchandise, offer a direct sales training programme on the best way to distribute promotional materials.
Also, consider giving monthly or yearly discount plans to guarantee revenue.
Lastly, extend your marketing to the online audience. Many people simply Google what they need.
Be sure to get recognised online, whether with a website or on social media.
Your premises may not be on a main street but social media is one big digital street.
Be creative with ways to increase your income and to reduce expenses. Most importantly, track and keep a good record of your expenses.