When it comes to discounting prices or increasing costs by a couple of percent, many companies don’t really baulk. Most businesses, especially highly profitable ones, tend to just go with the flow on those kinds of things. We’ve often hear, “No biggie – we will give them a 5 percent discount,” or we’ve been told with regards to a project, “we will send a truck or person back for another day, you know…just a couple percent added to the overall cost.” Is it okay to let go of a few dollars? Does it really impact the bottom line for your organization? Let’s find out.
Small Things that Matter the Most
Let’s begin with an example: If a company buys 1,000,000 dollars a year in inventory and decreases shrinkage (on purpose or by accident) by just 2%, it is adding 20k back to their bottom line. That’s a huge number. If a company spends 500k in labor each year and increases labor utilization by 1%, they are decreasing their bottom line by 5K. If companies start looking at every part of their business with the big picture in mind, it presents a great opportunity for them to improve. In business, every small bit plays a huge role in deciding how the overall picture will look. This is why businesses need to be careful about every single percent.
Growth Determines the Potential of a Company more than Revenue does
“Money makes money. And the money that money makes, makes more money.” — Benjamin Franklin.
The value of a company is the expected value of all future cash flow discounted back to today’s dollar, because today’s dollar when invested to make more money is worth more than a dollar made a year from now. Even if we don’t go into the mathematical details, it’s pretty obvious that a dollar earned now is important for predicting the cash flow of a business across time. We can assume that a company growing more quickly today is likely to yield better overall profits in the future. For a start, when we evaluate companies, we should look at their “growth” over time and not the revenue they are generating. In the same way, when you compare two companies, looking at earnings alone across two companies won’t give you the full picture of both prospects. And, when you’re looking at even earlier-stage companies you might be more focused on customer growth than revenue growth, as well.
Proper Business Optimization is Important for Companies
As we have seen, it’s important for businesses to document every penny that comes in or goes out. Not only that, before deciding to add or deduct even a small amount from the price, or making minute financial adjustments, it pays to understand how that small change will impact the big picture. While it can be a huge undertaking for small and large business owners alike to keep an eye on every small part of their business, failing to do so might be a recipe for incurring big losses. Business optimization software can help businesses keep a close watch on all their processes, turning an otherwise tedious and extremely time-consuming job into a more efficient one. Here’s what business optimization software promises to do:
- retrieve process performance information from monitoring processes
- identify the existing or potential bottlenecks
- find potential opportunities for cost savings or other improvements
- apply the knowledge acquired from the above steps to design the process
Software-enabled business optimization improves the overall business process, makes it easier to monitor every minute part of the business, and creates greater business value for a company in the long run.
TRXio provides the ability to accurately invoice all materials used on a job. For suppliers and manufacturers, TRXio eliminates transshipping and inventory shrinkage. TRXio provides flawless, end-to-end, real-time tracking and management of the entire inventory with integration with many popular software solutions. From receiving product shipments to in-house locations, technician delivery truck inventory, tracking outside purchases, and client job product use, TRXio allows integrators and suppliers to know where their inventory is at all times. Delivering real inventory enlightenment, cloud-based TRXio helps cut costs, recover hidden profits, and helps users stay informed as they track and manage inventory and assets through every stage of business. For more information, please visit contact us at 844-868-7225.