My friend came to me the other day and started discussing about the problems in their business. He said he is paying too much on everything and by the end of the month he finds that he is not having so much profit after all. I asked him what his business was, and he said he has an optometry business.
"Cool, then how is it that you have problems?" I asked him.
He said he trusted too much on those around him!
"That is good isn't it?" I asked him.
"Yea, it is to some extent so long as you do not get into losses."
"Well, explain me," I asked.
He began narrating his troubles. "I have my receptionists in the front office who take care of the appointments. Many times I stay with not much of work on days and they leave pretty early. You know I pay salaries and not wages. So, I am not sure if they preplanned in taking an off day so did not give any appointments, and I do not take walk-ins" he took a pause and continued again.
"I also have my lab charges too high. I am not sure if I am paying them so high myself or others are also charged similarly. My lab technician charges exorbitantly and I cannot keep low prices for the final product. What can I do? Also as I am going in my business, there are low sales and more expenses" he said.
Did this situation ever occur to you in your business?
What do you do if you find troubles as this?
Have you watched what you have to begin with?
What is the percentage of sales in your business? What is the percentage of costs? Are the costs having high percentage compared to prices? Did you know if the sales are being reduced for any reason? High cost percentage may mean either the sale price is too low or the retailers are not efficient. In this case perhaps there is a high margin of what the lab technician charges or sales person quotes. Are the percentages of salaries too high? Do you know if the company is overstaffed or may be a few people are taking high salaries or commissions?
These and many more problems of cash flow can be identified by reviewing your Financial Statements and contacting a consultant for your business health. By the way are you one of those business owners who do not keep track of working capital and end up in paying too many overdraft charges for the banks? Watch out what you have at the beginning of the month and deduct every automatic payment and checks you issued before you charge the card or write another check!
