Are You Collecting the Data You Need to Run Your Business?
Modified on 2009/12/22 11:20 by swathen — Categorized as: Uncategorized
Value Drivers: Building Reliable Systems to Sustain Growth
Mining the Balance Sheet for Working Capital
Inventory to Working Capital
How to Run an Effective Meeting
How to evaluate IT systems
It seems simple enough. You're making a decent gross profit. You know who your customers are, you know how much you are charging them for your product and you know how much they are buying. So no worries, right?
Well, do you know how much it costs you to sell to each customer? What if you are generating substantial sales from one customer, yet find yourself spending a large amount servicing that customer in terms of custom orders and/or shipping costs?
Not only must you know how much you are making by product line, but you should have an idea of what your gross profit looks like for each customer, especially your key large customers. Perhaps you are missing out on opportunities to reduce shipping costs through aggregating shipments. Maybe you are missing out on opportunities to head off costly service calls through greater communication with the customer up front.
In addition, you need to know how you make money. As simple as it sounds, many entrepreneurs don't figure this out. Are you making a larger margin on the product sale itself or on the sale of complementary products and/or services?
How long does it take you to collect receivables? Do you find yourself spending an inordinate amount of time trying to collect on a relatively small customer? What are your credit terms?
Greater detail can help you wring more costs out of your business plus identify opportunities for additional sales. You need to be able to put together realistic, detailed projections of your future monthly performance in terms of your gross profit as well as your working capital in order to gauge future capital requirements so you can plan for them today.
Do not wait. Start collecting that data and build that model today!