UHY LLP: How Businesses Can Identify Profit Drivers To Maximize RecoveryApril 23, 2020
ISSUES BUSINESSES ARE FACING
As businesses persevere through the economic slowdown, management will be faced with many difficult decisions in the weeks to come. Those will include decisions around workforce, capital allocation, and investment in innovation. Many organizations will need to determine which of its businesses, products or service offerings warrant continued investments and which ones do not. These are some of the questions that management should be asking themselves:
- Do we have data at a level of detail to effectively evaluate what combination of customers, products, and services will be the most profitable going forward?
- Have we been measuring and managing profit at a level that allows us to make the best decisions possible for the organization (both in the short-term in response to the crisis and in the long-term in anticipation of recovery)?
- What customers are the most profitable? Which customer relationships should we prioritize?
- Which product offerings are the most profitable? Where are my greatest risks associated with supply chain disruptions? What third-party suppliers and vendors should we prioritize?
- Do we have a team in place that can evaluate the data and make quick decisions that are in the best interest of the company as a whole?
- Have we built scenario planning into our decision-making process?
- What is our communication and change management strategy going forward?
Although urgency and decisiveness will be needed, an organization cannot lose track of the long-term implications that each decision will have on its business, culture, and mission. In these unprecedented times, it will be important that management’s decision-making process is based on objective, detailed data and involves a team with insight across the entire organization.
Prior to the COVID-19 Pandemic, studies have shown that up to 30% of a company’s products or customers may be unprofitable, according to profitisle.com. We provide in-depth profit mapping and analysis to unearth the true profit drivers and expense burdens of a company. Quick identification of less profitable business will allow a company to take short term steps to reduce losses and negative cash flow from these identified operations. We can provide:
- Detailed profit/contribution mapping by categories such as:
- Products and Product Lines
- FP&A Support: Our modeling expertise can help companies better analyze performance on numerous levels.
Please contact Michael Poveda to find out how businesses can identify profit drivers to maximize recovery.