If there is a common thread among the range of clients we work every day, it is that sales increases are hard to come by, and when they come they seem to come in spurts that do not last long. This puts even greater emphasis on cost management in order to consistently generate positive cash flow.
As I wrote before, in the world in which we now live, the financial success requires a commitment to the fundamentals of the retail business proven operational discipline and greater attention to detail. Moreover, financial success requires a commitment to continuously improve the management capacity, including the ability to manage their costs retail businesses.
Here are 6 tips to help you better manage your expenses.
1. You can not manage what you can not measure. Capacity Quikbooks software or other accounting / bookkeeping is a set of essential skills that should be in the toolbox of management. Capacity Quikbooks includes maintaining a proper chart of accounts, and discipline that each expense is entered in the correct account to the correct month, at the right time. Only then you will be able to generate the financial history necessary to develop realistic budgets expenses.
2. Effective cost control begins with setting realistic budgets. A basic knowledge of Profit and Loss Accounts (sometimes called Statements of Income) and Balances is a necessary starting point for developing a spending budget. This is where reporting of financial history for more complete business to check every bill and watching every penny. The Income Statement is where costs can best be reviewed on an annual monthly, or quarterly.
3. One of the most effective ways to control costs is the budget and measure each expense line not only in dollars but also as a percentage of sales. (Quikbooks have the option to report each item in the profit as a percentage of sales and losses.) The assessment of the costs as a percentage of sales sheds new light on the costs. Recognizing the important categories of expenses such as payroll and income can not exceed specified percentages of sales for the business to remain profitable lets you establish critical benchmarks.
4. Thinking expenses as a percentage of sales with special emphasis on the importance of maintaining the gross profit percentages, and highlights the importance of marking and sales percentages. When gross margin percentages are increasing that percentage means more points available to cover the costs (and flow directly to the bottom line)> The increase in gross margin percentages taking the pressure on spending levels, while reduction in gross margin percentages increase that pressure. Variable expenses are more manageable than fixed costs.
5. Variable costs increase or decrease as sales volume increases or decreases. A good example of this is the credit card fees. The fixed costs, however, remain fixed regardless of sales volume. Basic income is a good example of this. By its very nature, variable costs are the costs manageable. Structure many expenses as possible to be variable, particularly those with the potential to chew a significant percentage of sales. One technique is to structure the costs fixed variable pitch in a narrow range determined sales volume but variable in steps over a wider range of sales volumes. A great example of this is the percentage rent.
6. expense disbursement today is tomorrow. Expenses must be managed at the time of the responsibility incurred. This comes into play with many programs dating provider, but applies to other categories of expenses as well. Even if you do not have to pay the bill until later, you will still have to pay the bill. The income statement when incurred reflected in spending. Cash, however, is affected when the invoice is paid. If money is pinched when bills are due, the liquidity crisis is the result of earlier decisions, and in some cases, decisions made long before. In my next post, I’ll have six more tips for managing specific expenditure categories.