How To Check Revenue Leakage In Your Business
Most of us wonder why the profit is low in our business in spite of having a good turn over. Our known source of income is sales. But there are thousands of unknown sources through which your revenue may leak. Use the simple tips given below to arrest revenue leakage:
Set right Underpricing: Underpricing of goods is a common mistake which affects profitability. Check whether you are charging appropriate prices for the products. Take into account the value offered. Your price should be rewarding enough.
The logic of discounts: When you give a uniform type of discounts to all it does not work. Remove discounts for one-time customers. Set a minimum purchase amount for discount eligibility. Avoid giving cash backs. Cash backs may not always be reinvested again in your business. The customers may use it elsewhere. Also, the authority of deciding on discounts should be clear. Ensure that benefits are not offered to customers without proper knowledge of superiors.
Current assets: The level of current assets in any business has a crucial role in revenue leakage. Fixed assets like machinery are a one-time investment. Once the investment is done, there is nothing that can be altered about the investment decision.
But the nature of the current asset is that these do not stay constantly in the business. Current assets like cash, inventory, debtors etc. differ day by day. Prudence is to maintain these at the appropriate level. Too much of inventory lying idle is an indirect source of revenue leakage. Instead, if it was maintained as cash, the businessman can invest in crypto using the Qprofit system. This provides huge returns. Click here to learn more about it.
Whereas when the same cash is converted into excessive stock, it does not bring any return. It stays idle in godown till sale. Hence maintaining current asset at the appropriate level will reduce revenue leakages.
Educate employees: Make all your employees aware of plugging the revenue leakage. Make this process as incentive-based. That will make your employees motivated. They will surely offer more innovative ideas and work as a team towards avoiding wastages and income leakages.
Introducing ERP: ERP helps is avoiding inventory related income leakages. As a whole, it improves speed and efficiency in various business processes.
Avoid lengthy chains: When you have the buying or selling chain to be too lengthy, you tend to pay more towards the middlemen. Hence have short supply chains.
Raising invoice: Raise your invoices promptly. There should not be any delay in this.
Payment terms: Revisit the payment terms. Find out if customers are enjoying lengthy credit periods. If so cut it short.