Let’s say your firm has priced for an overall 50 percent profit margin but when your income statements come in, you see that the company is only earning a gross profit margin of 41 percent. What happens next? Does panic ensue? Do heads roll? Must you sit through a seemingly endless round of meetings where nothing ever seems to get done as profit gaps continue to haunt you?
Profit gaps are frustrating, and they can quickly cause anxiety among company leaders. However, if you reframe the way you think about profit gaps, you can effectively close them while positively impacting other areas of business.
Endless Combinations of Possibility
Think of your company as a Rubik’s Cube for a moment. There are nearly 43 quintillion possible combinations on this classic puzzle. Your business is far more complex than the six-sided color cube, and the patterns of procurement, production, and sales are nearly infinite. Those infinite possibilities lead to an abundance of avenues for profit gains.
It’s actually quite simple: Profit gaps are a result of variable forces, therefore, closing those gaps is merely a means of controlling variables. Each line item on a profit and loss statement is, to a certain degree, controllable. That means profit gaps are actually opportunities to both acquire and utilize resources in meaningful new ways to increase the bottom line.
Let’s think about some of those variables:
- Capital – The ability to attract money and use those dollars effectively impacts every other resource in the organization.
- Procurement – Profits, growth and success depend upon the ability to locate and tap into the right capital, materials and personnel.
- Sales – One of the most easily controlled variables.
- Production – Capabilities depend upon personnel, equipment, inventory, outsourcing, supply chain, warehousing, etc.
- Information – Getting the right data, impactful analysis of that data, and other knowledge to the right people at the right time to make strong, informed decisions.
Within each of these areas, the organization has opportunities to improve efficiencies, increase sales, widen margins and close gaps.
Roadblocks to Success
Controlling the variables that lead to profit gaps is easy. Changing leaders’ mindsets to view them as opportunities is quite another. Typically, firms experience these roadblocks when it comes reframing their perception of how to manage profit gaps:
- They fail to recognize and address constraints
- They get stuck in their ways (“We’ve always done it THIS way!”)
- Resistance to new procedures or technology
- Complacency (“We still performed better-than-average, so it’s a win!”)
A profit gap is an opportunity to improve, but only if the organization is ready to take control of variables – even when it seems those variables are impacted by outside forces. When you reframe profit gaps as opportunities, the possibilities for success are endless.
A forward-thinking organization is made up of forward-thinking people. If your company is seeking top accounting and finance talent, or you want to improve your accounting and finance hiring processes, contact the expert A&F recruiters at Contemporary Staffing Solutions today.