April is the month to check your buying policies, prices and commissions are all in step to maximise profits and minimise costs.
Review your buying policy
The way orders are placed for stock or services can impact sales, cash flow and profit.
How to review your buying policy
- Understand which services or stock are 'core' to your business.
- Tighten the ordering of services and/or the buying of stock so you always have what you need, when you need it, without excess stock or empty shelves.
- Negotiate with suppliers.
- Beware of discounts offered.
When working with suppliers to manage stock:
- use a stock control and inventory system that helps to manage your stock, including items you must never run out of to keep sales momentum – your customers should never be disappointed about your key products
- prioritise your needs from suppliers, such as fast delivery, good quality service or product, lowest price – often you'll find a supplier can provide speed, quality or price but rarely all three
- negotiate deals with suppliers, but avoid volume-based discounts unless you have good cash flow
- don't let discount prices drive your buying decisions – keep in mind your cash flow, and only order services or stock as you need it, unless your cash flow allows
Look at ways to increase sales
If you can increase sales, then both profitability and cash flow will benefit.
How to increase sales
- Review the pricing of your stock or service.
- Identify services or products that can be packaged together.
- Review any commissions or agents fees paid on sales.
- Review your discounting policy.
When setting or reviewing prices:
- have a pricing strategy in place
- compare your sales price to your competitors – a small increase in sales price is often acceptable to your customers
- remember that companion selling and upselling will increase the overall sales
- use promotional tools such as signs and direct marketing to highlight specials to drive sales
- review commissions and agents' fees against the sales items to ensure they're encouraging high margin sales
- understand how discounting impacts your bottom line – discounting sales can erode profits and cash flow
Review your invoicing procedures
The way your customers receive their invoices can influence the way they pay – good invoicing ensures prompt payments.
How to review your invoicing procedures
- Review how your invoices are set up – work out if they provide all the necessary information for the customer, including payment methods.
- Look at how frequently invoices are sent – send the invoice with the completed order delivered – don't wait until the end of the week or month because this will add to the days outstanding for payment.
- Review the procedures you have in place for customer disputes – the more quickly you settle any issues, the sooner you'll get paid.