Why Businesses Fail Financially Even When Increasing Sales With Decreasing Costs

Do you ever hear of people telling you about their success stories expecting high fives? Well, here’s a tip to burst their bubble. Try using the term SO WHAT!

My sales increased while balancing my budget.

  • SO WHAT about the margin you made on your orders?
  • SO WHAT about how much it cost in overtime to achieve this?
  • SO WHAT about the availability of resources needed to support the additional sales?

My message to you is this:  Don’t examine numbers in isolation. A project can be very successful in one part of a business with potentially devastating results in another, ultimately impacting profitability and or cash flow. Here are some examples:

  • Customers agreed to buy your product or services but insisted on 90-day payment terms. SUCCESS except for the fact that your business cannot pay its bills because of the time it takes to collect receivables.
  • Bought a great deal from the supplier saving the company 30%. SUCCESS except for the fact that you know have enough inventory to last for 2 years impacting cash flow.
  • We achieved our target of 98% deliveries in time. SUCCESS except for the fact that we ran over budget with payroll by 37% destroying our profits.
  • SUCCESS regarding sales but we cannot meet payroll because we’ve run out of cash!

Every decision has ……Cause and effect: whenever making a decision in your business, analyze all the touch points that could possibly be affected when making the decision.

To learn more about what the numbers really mean for your corporation or nonprofit, and how we can educate your team members to make the best financial decisions to sustain profitable growth (in a fun way), contact Neville Joffe today.