If you don’t produce regular accounts, you need to change this – the problem with P&L is that is telling you about the past not the future.
What I use a P&L for (for some quick wins) is that the only way to influence profitability is to increase revenues or cut costs or both.
So, to increase revenues (sell more) can take longer. Cutting costs can in most cases have an immediate impact.
I will go through line by line everything the business spends money on and ask, “Is this needed” and if the answer is YES, I then say, “but can I get this cheaper elsewhere”.
Some key areas could be:
Utilities – have you shopped around – have you got the best tariffs
Telecoms/IT – ditto
Stupid expenses – you may have water coolers in all your locations but is this necessary – you don’t need them – it’s a wonderful thing for staff & customers, but you don’t need them.
There was one business I took over were they had 17 water coolers across various sites, 14 coffee machines (all provided free to staff) – in that business we saved about £30k by getting rid of them!
When switching suppliers, you can sometimes get cashback or referrals. In one company I moved their company pension from one supplier to another and they paid a £80k referral fee (even though I was moving the business!).
EVERY WEEK YOU NEED TO KNOW
A Who owes you money
B Who you owe money to
C How much is in your bank account
You are in a good place if C is more than A
You are in a good place if A + C is more than B
You need to cut your costs or improve your revenues if B is more than A & C or if B
You need more money coming in that going out