PROFIT IMPROVEMENT PROGRAMMES by CMA Rajesh Kapadia
Profit is the resultant of revenue, costs and facilities.
A programme for improvement in profitability must constantly review each of these factors.
( See Annexure-1)
Improvements in Revenue :
These may include :
Increasing selling price
Reducing selling price where such action will substantially increase the volume of sales.
Changing the product mix to increase the volume of those products providing the maximum contribution.
Abandoning unprofitable products.
Improving the marketability of products in design,quality,reliability and service.
Direct Seling, where possible
Developing new product lines and markets.
Avoiding variety where possible.
Improved features to command better prices.
Extending sales areas
Better features of product to improve sales
Monitoring, controlling & reducing costs :
For monitoring,controlling & reducing Variable Cost following steps can be taken :
- Reduction in consumption of raw material per MT of Finished Product
- Elimination of some component by value analysis & value engineering
- Lower raw material cost by redesigning product
- Reduced wastages
- Vendor Development
- Competitive buying
- Better price negotiation
- Research & Development to reduce cost
- Improving material feeding conditions to reduce consumption of power, fuel & water.
- Energy saving
- Elimination of a non-available item or substitution of non-available item by a lower cost material.
For monitoring,controlling & reducing Fixed Cost,Manegement may explore the following options :
- It can be controlled & reduced per MT of Finished Product by operating the Plant at the optimum level.
- Any adverse variance of more then 5 % as compared to Previous Year should invite the attention of the management.
- For any substantial increase in Stores Expenses & Repaires Expenses,cost centrewise analysis is required to be done to fix up the responsibility and for taking corrective action.
- Expenses with respect to Stationery for Computer & Stationery for other
Office use can be controlled by entering into Annual Rate Contract with concerned suppliers which can be either for a given period or for a given quantity.
(5) Scrutiny and elimination of avoidable expenses
When above mentioned options are explored & proper steps are taken by the management for improving Sales Revenue as well as for monitoring,controlling & reducing Variable Cost & Fixed Cost,it will ultimately result in Optimising Profitability of the Company which will help the company to SURVIVE & GROW IN THIS FIERCELY COMPETITIVE DOMESTIC & FOREIGN MARKET.
CMA Department should make the following as an integral part of Profit Improvement Programmes :
“ NO COST IS EVER TOO SMALL TO SAVE. “
The above can be displayed at Prominent Places of Company’s Premises.
This will help to change the mind set of all employees.
Annexure – 1
Profit Improvement Programmes
|1||Sales Revenue||To Increase|
|2||Variable Cost||To Monitor, Control & Reduce|
|3||Fixed Cost||To Monitor, Control & Reduce|