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Profitability Management. Profitability. Revenue. Less. COGS. Less. Expenses. = profit. Profit Maximisation. Revenue. COGS. Opex OR With ↑ Rev. Revenue Management. Revenue Assurance. Assuring that each click is accounted for in the revenue. Timing.
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Profitability Revenue Less COGS Less Expenses = profit Profitability Management
Profit Maximisation Revenue COGS Opex OR With ↑ Rev Profitability Management
Revenue Management Revenue Assurance • Assuring that each click is accounted for in the revenue Timing • Recognition of Revenue pertaining to a month in the same period. Collection • Billing is complete only when money is collected. Product Pricing • The price of the product has to be decided in consideration with market, competition and end customer expectations. Discounts • Discounts offered to the customer flow through a series of approval as per the Metrics. Profitability Management
COGS Management Purchase Price • Negotiating the purchase price with the supplier. Overheads • Minimising the overheads cost of transportation freight, Insurance and other charges. Effective Tax Planning • Effectively planning taxes paid for the purchases. Eg Promo items provided free to customers purchased against CST than VAT. Payment Terms • Negotiating for the best payment terms with the suppliers . Volume Discounts • Obtaining volume discounts from the supplier on bulk purchases keeping in view the inventory management also. Profitability Management
Operating Expenses Fixed Each component of Cost is movable, fixed as well as Variable Variable Profitability Management
Cost/Expense Management Restraining the expenses from growing further. Money saved by change in plans or policies that reduce the expenses associated with a business activity. Profitability Management
Opex Management Personnel Expenses • Various ways through which personnel expenses and staff cost can be controlled. → Process Automation • Business process automation (BPA), focuses on streamlining and automating the key processes that drive value for an organization and its customers. → Vendor Management • An internet enabled, web based application that act as a mechanism for business to manage those third parties that supply goods and services. → Customer Relationship Management • A corporate Level strategy that focuses on creating and maintaining relationship with customers. → Others • Some other day to day cost saving measures that will help reduce operating expenses and increase profits. → Profitability Management
Management of Personnel Expenses Use part-time support staff. They don't require benefits and usually have more flexible working hours. Use an outside payroll service. Use college interns or co-op students for research, setting up databases, etc Have one person attend a seminar, and then later "show and tell" the rest of your staff. Broaden staff responsibilities. ← Profitability Management
Process Automation Business Process automation techniques: Extension of existing IT systems. Purchase of a specialist BPA tool Purchase of a Business Process Management solution (BPM). ← Profitability Management
Vendor Management Automate monitoring of controls Enable vendor managers to manage risk Track and address areas of non-compliance identified in the vendor assessment process. Measure vendor compliance to policies and procedures. ← Profitability Management
Customer Relationship Management • Key Customers Full partnerships • Low Margin Customers- Basic Relationship management • Weeding out unprofitable customer Selective relationship ← Profitability Management
Others Recycle and Reuse papers and ink cartridges of printers and photocopier Encourage use of emails rather paper memos as mode of communication. Fix one day in a week for employees to leave in time to save on electricity and transportation expenses. Find alternatives for air flights .book ticket in advance with low tariff air carrier Don't overpay your income tax quarterlies. If you anticipate that your taxable income will drop this year, don't pay taxes based on last year's income. Profitability Management
Working Capital Management Managing Cash • A business must have sufficient cash to meet its obligations else it will be declared bankrupt. → • Buying too much or too little inventory can lead to problems. → Managing Inventory Profitability Management
Cash Management Payment on due date Inventory Strategy in place Aggressive with past due Do not miss any COD opportunity Interest Income ← Profitability Management
Inventory Management ROL, MOQ, Transit period Perpetual Stock Take Demo Policy Slow Moving and Non Moving Senior management review Profitability Management
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