Many times it happens that, although it has a good sales volume, the results reflected at the end of the month are not satisfactory. Possible reasons that can generate or contribute to this situation.
Many times, although it has a good sales volume, the reflected results are not satisfactory. It is important to stop and analyze some possible reasons that may generate or, at least, contribute to this situation.
to get started, keep in mind that, although it may be generating a high level of sales, both high direct costs and general expenses directly affect the profitability of the business. It is important to differentiate these two expenses, since the way to counter them is different. If it is a structure that has high fixed costs but a high direct margin on the products or services offered, an increase in sales volume will surely translate into better results. Conversely, if direct expenses are high, the strategy must consider another type of approach that allows improving its gross return (direct). It is common to see that the owners of firms seek to increase the volume of sales of goods that do not generate interesting margins.
Aligned with it, many times there is a range of items that handle multiple product lines or business units, they possess, at the same time, different scales of profitability. It is extremely important to understand the product mix and consider this point when designing a business strategy. Goals should be set in relation to different possible performance rankings, considering what is leveraging the business and what is not, and what generates better results, with the premise that "selling more is not always selling better". Many firms promote a good or service without first evaluating this aspect, increasing the sales volume of less profitable products and obtaining a lower profitability than desired, making the company less effective.
On the other side, not to forget that promotions also imply an increase in billing at the expense of performance. They can be useful to drive the business and increase the net result, but it punishes the percentage yield.
Looking at some of the financial difficulties that occur, it is necessary to analyze that many times good sales are generated with good results, but with bad cash flows. This can happen, for example, due to very long payment deadlines and too short payments, which translates into little cash at the end of the month. The periods with the highest turnover imply, at the same time, higher variable costs, generating positive results from the commercial side, but with possible negative cash benefits.
She finally , it is also worth considering the factor of generating high inventories. There must be a “logical” relationship between the immobilized stock and its rotation, to avoid unnecessary losses. For example, despite a good sale, if the accumulated stock is high, the asset is not liquid and consequently the results are not appreciated.
It is vital to consider these points when designing a business strategy as appropriate as possible., setting goals based on the most profitable products. Once these are established, it is important to apply good commercial dashboards (TACOs), and use all the tools to detect deviations and act quickly. Once , and based on a good analysis of the available information, commercial actions may be implemented to further leverage the business.