On of the simplest ways to increase our profitability is simply to avoid non-essential expenses.
The expenses we should try to avoid the most are fixed expenses, wherever possible we should rather take on expenses as variable expenses rather than fixed expenses.
A fixed salary for a new employee or contracted rent for premises are examples of fixed expenses. These can e converted to variable expenses by entering into an arrangement with an employee only for the amount of time that they will be needed or renting extra space only for the amount of time required.
The way to determine if expenses are essential to the business or not is to calculate if the extra expense will affect profitability in any meaningful way. If it is expected to make profits go up significantly or prevent profits from dropping appreciably then it is worth investigating further to determine any other impacts the added expense may have.
Once the cost benefit analysis is completed then we need to see if there are ways to make the cost a variable one whenever possible. Variable costs should scale as profitability scales
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Many businesses end up in a cash flow crunch due to unexpected expenses (for example, costly repairs to equipment, replacing malfunctioning technology or a natural disaster) or too much money going out each month (such as ongoing expenses that have quietly crept up to an unsustainable level). Resolving a cash flow crisis requires that business leadership take a renewed, vigorous look at their ongoing cost structure. Every business owner should have a rigorous process in place to track expenses on a monthly basis and project future expenses for the months ahead. A good business accountant can work with you to make sure you have an eye on the overall health of your business cash flow and are better positioned to anticipate challenges as they arise.
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Protect pockets from unnecessary expenditure, keep pockets open for meaningful expense.
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@sme good post..nice to follow you.
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