It is not just enough that you increase your sales or area of operations. You need to know whether you are actually making a profit or not. If you do not do this exercise, you will not likely judge whether your business is successful or not. Moreover, keeping track of your profit is the best way to measure effectiveness of other functions like production planning, marketing, advertising, etc. There are many instances of businesses that did high volume, but lost their advantage because they ignored adequate profit planning. For small businesses especially keeping constant track of the profit plan is the best way to increase competitiveness.



So, we repeat again that the gross revenue is not that critical as the net profit is. You need to know what eats into your profits and how you can plug it.

The best way to keep track of your profits is to make a financial plan and measure actual performance on a periodic, preferably monthly basis. This allows you to detect problems early and correct them quickly.

Here are a few surefire strategies:

Make a realistic financial plan. This means put down in money terms how much revenue you project for the period. Factor in the corresponding expenses.

Install a suitable accounting process that records the transactions in a timely and accurate manner. Always set aside some time to review your accounting transactions. This prevents frauds.

Remember that time and money lost can never be recovered. At best, you can only recast your projections and work towards a more achievable target. This approach however does not allow for risk-taking. Therefore, a plan that combines aggression with pragmatism should be followed.

Analyze the loopholes and plug them right away. If your sales have not increased as expected, consider efficiency of marketing staff or effectiveness of the marketing strategy. Remember, accounting profit does not occur out of the blue. Make team work the cornerstone of business success. Brainstorm for ideas on improving efficiency and cutting down costs.

Always do a complete cost benefit analysis for any investment. Extra outgo for the purchase should be more than matched by sales inflow.

Increasing your profit should be the motto. Therefore, attempt measures to improve profit through reduction of costs or better utilization of resources. If your growing revenues were just about matched by soaring expenses, you would soon go out of business. Higher dollar inflow from sales should actually translate as higher dollar for keeps as profit.