Three Key Questions to Identifying Financial Inefficiencies in Your Business
Updated: Jun 17, 2021
1) Do the hours you spend on administrative tasks reduce your company’s potential revenue?
Operating a business always has more moving parts and expenses than expected. This often leaves the business owner or other highly valued staff to deal with administrative responsibilities. As a result, we have seen many business owners and other revenue generating personnel spending too much of their time on activities that are not generating revenue.
We’re not saying that you shouldn't be spending quality time on administrative tasks. However, all businesses should take a thorough look at who is dealing with administrative tasks and whether their time could be better spent elsewhere.
We have witnessed some business owners so consumed with day-to-day tasks that most billable work is completed by their employees, who often have a lower billable rate. It's easy for management to become tied to these tasks because they've been running them perfectly for years. As a business owner or manager, you must take a step back and consider if these practices might be detracting from your overall revenue producing ability.
Hiring additional administrative staff or outsourcing may sound like an additional expense. However, CPN & Associates' experience evaluating time allocation and financial bottom lines indicates that spending money on administration allows you to spend more time on revenue generating tasks.
2) How can you increase your revenue without increasing your investment?
“You have to break some eggs to make an omelet”, “Scared money doesn’t make money.”, “It takes money to make money". As a business owner, you’ve likely heard some iteration of these phrases. Certainly there is some truth to these phrases, but you don’t always have to use additional resources to create additional value.
Similar to understanding administrative tasks and how they affect your revenue potential, a critical eye towards value creation and current practices can help you find these opportunities.
As an example of finding additional revenue, a client of ours was struggling to increase short-term revenue in order to hire a new sales person. In conjunction with other expense cutting measures, we found shifting other staff members to sales positions would better utilize time and add revenue critical to hiring additional staff. Furthermore, the manager placed in a short-term sales position gained key knowledge of overall operations.
3) How can you cut costs without sacrificing your revenue goals?
In addition to increasing revenue without adding additional expenses, you can also begin to understand how you might be able to decrease your expenses while maintaining revenue figures by reviewing your financials regularly.
Similar to a monthly Netflix subscription you don’t use but keep paying for, there may be business investments draining your resources that don’t create value. One of the main issues we find sapping business resources is an abundance of suppliers. Over time, businesses will acquire multiple vendors for the same product and incur the additional expenses that comes with each. Consolidating similar vendors without forfeiting diversification often reduces costs without sacrificing your revenue goals.
CPN & Associates LLC is a Business Consulting Firm offering strategic business reviews, analytical financial reviews, operational management, and many other small business services.