| Ways to Improve Your Business’ Debt-to-Income Ratio to Get a Bank Loan

Posted in Business Financing at 9:00 AM by Loftis Consulting

It makes no sense to begin a loan process if going in you don’t know or understand the key metrics lenders use to determine to who they give credit.  The debt-to-income (DTI) ratio is an important metric used by banks and other lenders as one factor in determining your business’ ability to pay monthly debts in order to extend credit.  The formula is as follows:

DTI = Monthly Debt Payments/Monthly Pre-tax Income

Make sure you include the projected monthly debt payment for the needed loan in your calculation.  The lower the DTI result the better; however, it will vary by industry since some businesses have to take on more debt than others in order to operate such as manufacturing companies versus professional service firms.

Once you have determined your DTI, and if it is too high for a lender to give you a loan then you will need to find ways to improve this metric before applying for the loan.  This will take time and discipline.

 

Steps in Improving DTI – Expense Control

  1. Review expenses and cut out any expenses that do not go to the heart of the business and any extras. It may be a sacrifice in the short-term but remember the goal is a loan.
  2. Review expenses and remove any one-time non-recurring expenses. You want the bank to focus on normal day-to-day expenses.  Major one-time costs could negatively impact the calculation.
  3. If you know that there are some major expenses coming up delay them until after the loan process has been completed since any major expenses will unfavorably impact DTI.
  4. Recalculate DTI based on steps 1-3. If not where you need it to be think of ways to improve monthly pre-tax income besides expense control such as improved sales.

 

Steps in Improving DTI – Improve Sales

  1. Review length of time it takes to sell inventory. If it is over your industry average look for ways to move it faster. For super old inventory put it on sale to improve short-term cash flow.
  2. Perform data analytics on customer base in order to target sales better. Loftis Consulting can help analyze your sales data for improved results.
  3. Get rid of slow moving product and increase amounts available to sell for products that sell easily.

 

Steps in Improving DTI – Other Tips

  1. Lower the loan amount requested if possible. This way you meet the DTI guidelines and if the loan investment will improve sales or make your operations more efficient you can get a future loan as the savings or increases sales are realized.
  2. Shop around for a bank that caters to your industry. An industry-specific banker will likely have more flexibility on the DTI requirement since they understand your business. Most banks want a DTI no higher than 36%.

Need help getting your financials in shape for a loan submission or need assistance with expense management and increasing profits, call Loftis Consulting today for the CFO Services.

| Investing in Commercial Real Estate? Avoid These Errors

Posted in Finance at 9:00 AM by Loftis Consulting

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Investing in real estate is often said to be where the all the money is. While the reliability and profit margins of real investments is often overstated, there’s no denying that it can be an extremely lucrative area of investment. But what if you’re investing in commercial real estate? In that case, your returns could be even higher.

But it’s not exactly a walk in the park, nor is it all that similar to residential real estate investment. Many people who have found great success in the latter have moved onto commercial real estate, hoping to parlay their winnings and achieve even greater success. They often find themselves surprised by how different the two can be!

So it’s important not to go into this with too many assumptions. There are a lot of mistakes you could potentially make. We’re going to take a quick look at some of the biggest errors you can make in the world of commercial real estate investment.

 

Not Marketing the Property

There are loads of new businesses being created every day, and a lot of them need an area in which to do their work. So surely people are going to come to offices you’re investing in without you having to put in much effort? Wrong. Not only do you have to consider the fact that rival commercial real estate investors are engaging in marketing that will see their properties listed way ahead of yours; you also have to remember that more people are choosing to run businesses from home than ever. The right marketing can help combat both these problems. These properties are definitely not going to sell themselves!

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Neglecting Maintenance

A lot of investors in this area make the mistake of neglecting the maintenance needs of their properties. People tend to know that residential real estate needs a lot of maintenance and repair, but they may also assume that this isn’t that important when it comes to commercial properties, perhaps because people care less about their offices than they do their homes. This is a mistake. Ensure that all the properties receive the maintenance they need. If the building as a whole needs work, then ensure you’re hiring the right experts. A commercial roofing contractor, has the expertise to maintain and fix a roof that technically covers several properties.

 

Assuming All Prospective Tenants Are Wealthy

When people think about business owners, they often imagine very wealthy people; the kind of people who sit with their feet up on their desk all day, lighting cigars with burning $100 bills. The truth is many of them are people who have only owned their business for a couple of years and have perhaps not even turned much of a profit on their business yet. So if you’re thinking of jacking the rent of your properties up to staggering prices in order to get a healthy piece of all that business wealth, then you should probably rethink your approach. While you should also take care not to let yourself get a hard bargain on the lease, trying to squeeze these business owners is simply not a great strategy.

| How To Kick Those Killer Financial Issues For Good

Posted in Finance at 1:00 PM by Loftis Consulting

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Finance is one of those areas of business you either love or hate. On the one hand, it relates the money you make, but on the other, it can be a whole lot of hassle. Every business has their money issues, whether they’re good or bad. Regardless of what those issues are, they can be crushing on both a business level and emotional one. But, there aren’t many financial issues that can’t be resolved. So, if you’re suffering from your finances big time, here are a few ideas on how to get them back on track.

 

Not Being Paid

In business, we all need to be paid. So, when you find yourself chasing accounts contacts every single day and getting nowhere, you can often feel at your wits end. But, luckily for us all, you don’t have to write that invoice off as a no go – you can see it being paid. Invoice factoring can make that happen. If you’ve not used this service to get your invoices paid before, you might want to compare the best invoice factoring companies and find one that will be suitable for you.

 

Overspending

Budgeting is highly important in life and not just business, so whenever you find yourself overspending, you need to reassess your situation. What can you do to claw it back? Do you need to cut out some of your fixed costs? Do you need to work on pushing your income? Either way, when you find yourself constantly going over budget, you’re going to need to work on cutting out some bills until you can start to make a profit again – especially if your business is firmly established and you have been making a profit in the past.

 

Being Held Back

Sometimes, you can find that your currently financial status is stopping you from growing as a business. If your cash flow is okay, and you’re making money, but you don’t have the kind of capital that you need to expand, you can find it in other ways. Whether you look for investors or even sell some shares, now’s the time to stop letting your finances hold you back from something bigger.

 

Abused Expense Accounts

Unfortunately, you will find that some people do abuse their expense accounts across many areas of business. When you’re the person doing the spending, you can often think that it’s okay for the company to pick up the check, but sometimes, it just has to stop. If you’re in financial difficulty and those expense accounts are creeping up, it might be time to cut them altogether, the reduce the amount you hand out or even put a monthly or yearly cap on them.

 

Increasing Rates

And then there are the areas of business finances that keep on creeping up without your control. Some of your supplier rates or even your fixed costs that allow your business to run can increase from time to time. If these increases cut into your profit, you might need to think about doing what you can to brush up on your negotiation skills and keep them where they are for a little while longer.

| The Best Ways to Fund Your Business Expansion Plans

Posted in Business Financing at 9:00 AM by Loftis Consulting

Most business owners have big plans for the business and where they want it to go in the years ahead. That’s perfectly normal, but how are you going to find the money to fund all those plans? It’s easy to come up with plans for a business expansion, but it’s never so easy to actually fund them. It’s a problem that many business owners run up against. However, there are plenty of interesting ways to generate the money you need for your expansion.

 

Selling Shares

Selling shares is a great idea if you’re willing to relinquish a small amount of control over your company. You can still make sure that you own the majority of the company’s shares, meaning you retain control. Every share you sell will raise a small amount of capital. If you sell enough of them, and your share price is fair and reasonable both for you and you the stock market investors buying them, you could raise a considerable sum. This money can then be used to grow your business and take it in the direction you think is best for its future.

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Invoice Factoring

Does your business have a lot of old invoices that remain unpaid? It’s a problem that is all too common for businesses. However, you can get around this problem by using those invoices as a source of funding for your business. This is called invoice factoring, and it’s something that more and more small businesses are starting to make the most of. There are plenty of external companies that can help you out with this kind of funding. Just do some more research into it, and learn as much as you possibly can about it before making your final decision on the matter.

 

Appealing to Investors

Another way to get money from investors is to appeal to them directly. This involved presenting your idea and information about your business to a small number of investors. They might be investors who have a particular interest in your market sector. Or they might be venture capitalists looking to see a relatively fast return on their money. You need to be professional, have some strong ideas, and be able to present them in a coherent and appealing way if you want to make a big success of this. It’s not easy, but it can be done if you take the right approach.

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Reinvesting Profits

If your business is looking to expand and branch out, it must already be making money. So, why not start reinvesting some of the profits that the company is currently raking in? Rather than paying yourself more or paying out dividends to investors, you could use that money to take the business further and expand it in the way you want to. Of course, this only works if your business is in profit and managing to more than cover all of its existing costs. But if that’s not the case right now, maybe expansion shouldn’t be at the forefront of your mind anyway.

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| Don’t Fail To Prepare For These Potential Cash Flow Issues!

Posted in Cash Management at 5:00 PM by Loftis Consulting

New business owners are often taken by surprise by unexpected cash flow issues. Problems of that nature can cause serious concerns for any company. The last thing you need is to discover there isn’t enough money in your accounts to pay your suppliers. When that happens, you have to ask for an extension. Before you know it, you spiral into a financial situation that’s difficult to resolve. With that in mind, we wanted to offer some advice today that you can use. Hopefully, the potential issues mentioned on this page will give you a heads up. If you prepare for these events and keep extra cash in your accounts, you can weather the storm. So, pay attention, and put this information to good use as your business grows.

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Credit Card Chargebacks

Chargebacks occur when someone calls their credit card company and asks them to reverse a transaction. That can happen when one of your customers isn’t happy with their purchase. It can also happen when someone just wants to play games and cause trouble. It’s a major issue for you because it means money can leave your accounts without notice. The credit card companies won’t contact you in mind instances. They will just send the cash back to the original account. Chargebacks are a real pain for business owners just starting out. For that reason, it makes sense for you to keep all funds in your bank for at least a couple of weeks after each sale. That way, you won’t miss the money too much if it disappears. Don’t rely on that income until you’re 100% satisfied the customer received their item and you avoided any problems.

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Employee Injuries

Like it or not, someone could become injured when working for your company. When that happens, they will often make a claim for compensation. The money is designed to cover their loss of earnings and any medical bills. The process can become costly because you will have to pay for legal representation. You will also lose the worker until they recover, and that means your team is one man down. To limit the number of times that happens, you must place emphasis on adequate health and safety precautions. You should manage to avoid all workplace injuries if you get things right. As you’re just starting out, you might require some assistance. Thankfully, there are professionals you can pay to come to your office or warehouse and perform assessments. They will then offer advice on the best course of action.

 

Fines from the Government

Depending on the nature of your operation, you might have to pay government fines at some point. That is especially the case if your processes are deemed to harm the environment. There’s a big push towards green technology these days. So, maybe you should consider changing the way you work? Whatever you decide, make sure you research the potential fines you could encounter ahead of time. That way, you can ensure there is always enough money in your accounts to cover them. Of course, the best thing to do involves avoiding the penalties altogether. So, now is the time to perform as much research as possible. Regardless of your business model, there are always ways in which you can protect your interests. Even if you have to spend money upfront, it’s better than getting into trouble with the authorities.

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Other Legal Issues

There are a million and one different legal problems that could affect your company. Considering that, you need to build a relationship with an experienced lawyer. If you do that, they will often let you pay for their assistance in monthly installments. That should stop the expense from affecting your cash flow too much. At least you will know how much you have to pay at the end of each month. There might come a time when another business owner claims you’ve infringed on his copyright. Court cases of that nature can take a long time to reach their conclusions. So, you need a reasonable specialist who won’t expect the payment upfront. Of course, you still need to keep a close eye on how many hours that person works on your case.

Now you know about some of the most common cash flow issues, we hope they won’t take you by surprise. There are lots of other things that could affect your operation. However, the instances mentioned on this page are by far the most likely. With that in mind, learn from the advice, and keep as much cash in your accounts this year. Failure to do that could mean you end up back at square one. That would be a shame after all the effort you’ve made thus far.

| Small Business Owners: We Need to Talk About Fraud

Posted in Finance at 4:00 PM by Loftis Consulting

All over the world, fraud accounts for approximately $3.7 trillion of losses to businesses and economies, and the typical business loses around 5 percent of their revenue. While huge corporations can often handle those losses with ease, the reality for small business owners is that it could be the difference between survival and folding. And given that small businesses simply don’t have the security budgets of the bigger companies, that 5 percent figure is likely to be even higher. The big question is, what can small business owners do about it? We’re going to take a closer look at fraud and how it affects small companies – and go through a few solutions.

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System Integrity

First of all, if you want to stop external hackers getting into your system, it is almost impossible to stop them if they have enough determination. The good news is that hackers, like burglars, much prefer easy targets. So, if your small business ensures you invest in even the most basic of firewalls and antivirus programs – and keep them updated – the majority of hackers will look elsewhere. Make sure you are making daily backups of all your data, too, and ensure you have robust encryption in place. If you are using the cloud services that are available these days, it’s vital to ask rigorous questions about how they treat security issues.

 

Employee Training – and Checking

It’s not just external fraudsters that can get into your business – your employees could be party to a lot of confidential, valuable information. Sadly, there are plenty of examples of employees who steal data and use it for their own purposes, so make sure that you are only giving data access to staff on a need to know basis. There are also plenty of ways an employee can make a mistake, so tight training on security is essential – even for basic administrators who might leave access open by leaving their computers logged in overnight, for example.

 

Mobile and Devices

If your company has an app that your customers use, make sure there are sound checks in place if valuable information is used. Nothing to do with making payments, for example, should have a lot of protection – you can try using an identity verification service if needs be. Mobile payment systems need to be watertight, too, and only allow payments from registered and recognized devices and accounts. Cybercriminals could be into your system in a flash without robust protection, and there are threats to contend with everywhere.

 

Inventory Management

It’s not just cyber security you need to worry about. Your stock is worth a lot of money, and theft and fraudulent ordering are a real threat for small business owners. Make sure that you are making regular spot checks and inventory counts, and take advantage of high-quality, highly secure management systems to control your flow of stock.

Whatever industry you are in, fraud is a serious issue for small business owners. It is essential that you put the right protections in place anywhere that valuable information or money changes hands. Failure to do so could result in an embarrassing PR disaster or even severe legal consequences.

| When Business Budgets Strike Back

Posted in Cash Management at 9:00 AM by Loftis Consulting

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The trouble with starting a business is that it can cost quite a lot of money. In fact, the average for the costs of a start up in the first year is close to thirty thousand dollars. That’s crazy when you think about it because there’s a good chance you have nowhere near that much in your savings. And you will be using your personal funds to pay for the company, at least at the beginning.

Although, as it turns out that first payment is just the first problem you’re going to encounter with costs. You will also need to think about whether you’re getting a quality service from the companies that you’ll be paying to keep your business running. On top of this, there’s the issue of taxation. A lot of new business owners completely forget that they’ll have to pay tax as soon as they start making money and list doesn’t end there.

Let’s look at some of the great issues you’ll face with business finances and figure out how to handle them effectively.

 

Getting the ROI

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Getting a solid return on investment is crucial if you want your business to be a success. You need to make sure that you make money from whatever you buy in the long run. A good example of this would be hiring your first employees.

When you hire your first team members, you need to work to get the best on the job market. One of the worst mistakes you can make is hiring workers just to make sure you have a team. It doesn’t matter if you have a full staff, if they’re the wrong people for the job, your business will fail.

To ensure you get the best team, you need to work with other people in the industry. In this case, your number one source should be a recruitment agency such as https://www.rec.uk.com. A recruitment agency acts as a gatekeeper, and behind that gate, you’ll find the best talent for your company. But to reach it, you have to be willing to invest a little of your funds into a recruitment service.

This isn’t the only situation where an ROI is going to be important. If you’re running your business from an office, you’ll need to purchase quite a lot of tech. Make sure you are thinking about the long-term benefits of this technology rather than a short term small cost. For instance, you can buy older, second-hand tech at a lower price and immediately cut the costs out of your start up. In the long run, however, this tech could cost you more money because it’s less efficient. You might also find that it breaks down more easily and isn’t as reliable. This is a solid example of why the cheapest isn’t always the best option.

 

Finding the Funds

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As already mentioned, your first year on the market will be paid for out of your own pocket. As such, you need to be careful with spending. You’re going to run out of personal funds pretty fast regardless, and at that point, you’ll need to think about loans.

With sites like https://personalmoneystore.com, it’s easy to get small amounts of money fast, and this is your best option. Do not rush to borrow hundreds of thousands that you won’t be able to pay back. Keep the amounts that you borrow small and sweet, that way their easily manageable. Don’t forget, it’s not the overall cost of the loan that you need to worry about. The interest rate is a killer. The bigger the loan, the more interest there will be. Borrow money, pay it off as you go and your business will always stay in the green.

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Of course, you might find that eventually, you need larger levels of capital. The best way to get it is to ensure it’s provided by revenue. But you won’t get this level of revenue with the typical customer base. Instead, you need to think about appealing to key players who could take your business to the next level. We can look at an example of this by thinking about a car repair company.

A car repair company will be working with a local customer base. They’ll be repairing cars of individual private customers, but this isn’t where big money is. To get big money, car repair companies need to get a business client. That way, they can work of car fleets and that point you have a massive source of constant revenue. There are possibilities like this in every business model. For instance, a wholesaler could end up supplying a lot of stock to a superstore. This is all about finding the business leads and using them to your advantage. You can read more about this on http://convert.leadforensics.com.

 

Dealing with Taxes And Unexpected Bills

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Finally don’t underestimate the danger of taxes in your business model. This might seem like a small consideration, but it isn’t. Taxation can be a big threat to your business if you don’t keep your records accurate. Let’s say you estimate a few of the bills in your first year running your business. This could lead to an audit and a thorough investigation of your company finances. That’s the last thing that you want.

It puts pressure on your business and might ultimately end up with a large bill you weren’t prepared for. To avoid this, you  might want to hire an accountant and you can find one on https://www.sparehire.com. This can seem like an expensive, unnecessary hire, but if it keeps you out of trouble with the IRS, it will be worth it. If you are looking for more extensive services, Loftis Consulting can provide CFO services for cash analysis and long-term business financial planning.

As for other unexpected bills, you always need to adjust your budget to accommodate a few extra thousand. You can use this to fix tech if it breaks down, hire services that you didn’t think you would need and cope with possible loss. Don’t forget when you open your company you will immediately be at risk of hacks and theft. Insurance should provide a safety net but having some extra funds to cope with the short-term repercussions is always a smart move.

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| Ways You Could Better Prepare For Profits

Posted in Finance at 12:00 PM by Loftis Consulting

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Every business wants to make a profit, but not every business understands that to do so requires preparation, organisation and meticulous reinvention when something doesn’t go exactly to plan. You can’t simply roll out a product or a marketing campaign and expect the customers or profits to pour on in; you need to be constantly looking over the company’s cashflow to see ways in which processes could be improved to become more profitable or places in which unnecessary costs are bringing the business down. If you’re wondering how to achieve this, then here are some ways in which you could better prepare for profits within your business.

Do Accounting Properly

Accounting is such a common word in business that many companies simply throw together an accounting department with little thought and don’t realize that not only are they wasting money by over-hiring, but they’re wasting money in that they might be overlooking sectors of the business in which they could be saving or even making more money. Your business might be able to save far more money by outsourcing its accountancy services to one small team, rather than hiring far too many new employees.

You’ll ensure that you’ve got a dedicated sector external to the company which will be striving to reduce energy bills which unnecessarily waste money or even to negotiate fairer deals with the company’s suppliers. There are always ways to make profit, but the answer isn’t always to invent a new product. Sometimes you need people who can help your business look inward and decide how to save money through whatever you’re already doing.

Assess Your Products or Brand

Beyond cost-effective methods, your business should also be looking inwards in terms of a self-assessment of its value. You need to be looking at the brand and its services to determine how valuable the enterprise you’ve created is and what more could be done to push it upwards in the market. You could look into royalty rates for trademarks as a way of assessing how valuable your business’ products or assets already are. You need to be gauging your current success to see if you’re meeting your profitability targets. This is the first step towards a more successful brand, but also a more successful range of goods or services.

Margins

Every business owner raves about them and for good reason. You want there to be a substantial increase in the price of your products or services and whatever expenses went into creating those products or services. This is the difference between profiting slowly and quickly. If you’re looking to increase your margins without upsetting customers through unfair prices, there could be ways to cut costs within the manufacturing process. However, it’s more important to maintain quality, as customers are usually willing to pay slightly more if the prices are still in-line with competitors. Of course, as a rule of thumb, the best time to raise the price of your goods is at the point of an increase in demand.

| Give Something Back: Creating a Business-Charity Partnership

Posted in Non-Profit at 10:00 AM by Loftis Consulting

If you have set up a successful business and made some good money, you might be thinking that it’s time to give something back. A good way to do this is to set up a partnership between your business and a charity. It is also a very good way of getting publicity for your company, and improving public relations. Choosing the right charity is vital, as you need to choose something that you think is a worthy cause, and will also play well with your customers. If you are considering setting up a business-charity partnership, here are some key things to consider when choosing an organization to work alongside.

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What Are Your Values?

A good first step is to outline what your priorities and values as a business are. This will help you to find charities that have similar values to your own, and form a natural partnership. You need to be careful that any partnership does not contradict your own personal business goals, even if it is with a charity. Once you have outlined your main values, try thinking about which charities are in line with that.

Your Customers

The opinions of your customers are very important when trying to choose a charity to work with. Do some research into which charities they tend to donate to, and which causes are important to them. If you find any major trends, you can use these to your advantage. For example, if a lot of them are interested in donor brick paving, you could partner with a similar charity. This will benefit you because it will cement your image as a good company in your customer’s minds, and improve brand loyalty. Similarly, you need to make sure that you don’t partner with charities that your customers are not interested in, or don’t consider worthy. If they feel that your company is completely at odds with their priorities, they might think twice about giving you their business in future.

Your Employees

Finding a cause that your employees are passionate about as well is key to starting a business-charity partnership. If they are not invested in the cause, then participation will be low and you won’t get very good results. If you choose something that everybody cares about and is willing to get involved in, you will end up making a lot more money for your chosen charity.

Picking A Charity

Once you have considered all of these factors, you will probably have a shortlist of potential charities to work with. It is often best to choose a local charity, or at least one that has offices nearby, to make collaboration easier. But you need to balance this with the potential marketing benefits of the charity. Choosing a larger charity will get you much more publicity than a small local one that is unknown outside of your city.

It is also important to make sure that you have thoroughly researched the charity to ensure that it is properly registered, and that it is a legitimate charity.

By building a partnership with a good charity, you can give something back, whilst also improving your own business.

| The Profit Protection Guidebook

Posted in Finance at 9:00 AM by Loftis Consulting

A business is only as good as the amount of profit it makes. To do this you need to ensure that it is of course first making a profit, yet also ensure that the profit you do make is protected and allowed to be accrued. This is the same in all businesses bar certain charities, and even they need to make money to ensure that they run properly. The type of business you operate will dictate how you defend your profit, but these are some tips that can apply to the majority of them. You may have even considered some of them, but if not give them some thought to mitigate the issue of lost profit.

 

Limit Mistakes

Mistakes can be made with ease on paper. Perhaps you have ordered too much of any one given item which now means you’ll be selling at a loss. Maybe you have done the math wrong and you thought you were making a decent profit but have been operating at a loss for the past two months. You can limit these by hiring from a Credit recruitment agency, someone with the expertise required can help you limit mistakes and ensure everything is working as it should. You could also consider some kind of software that you can use to ensure you don’t make mistakes that could lead to potentially disastrous consequences.

 

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 Use Great Systems and Control

Protect your profit by physically keeping it safe. Use a safe to put the takings in and bank it every day depending on how much you have taken. This is important because if anything happens you are essentially going to be okay because you’re limiting the money that is available to be stolen. You would rather lose a day’s takings than a week. The literal profit is the most important aspect. You need to make sure it isn’t accessible to all of your employees either. You may not think they are thieves in anyway, and they may not be, but it would be better if you didn’t have to find out. Only let those that you trust come near your stacked profits or know the codes for the safe that you use to store it in. Prevention is the best form of protection.

 

Be Careful With Stock

Many businesses use stock. Those which offer services don’t need to worry too much about it though there still are issues to consider. You need to ensure good processes are being followed. Broken stock eats into profit, as does accepting stock that hasn’t been delivered. You need to stop this as much as possible. There are all kinds of new inventory management software that you can use to help ensure your profits stay healthy. This also applies to things like printer ink and general office equipment. If it is going missing, then you need to look into it. Everything that can eat into your profit needs to be stopped and mitigated as far as you possibly can. Only then can you be comfortable that no mistakes will occur.


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