Financial Strategy Management: Don't Let Profits Go Through The Motions.

The turnover of some enterprises has reached one billion or two billion, but this does not mean the realization of full profits. It is only a scale of operations. Turnover is not directly proportional to profits. Most enterprises now face many difficulties: turnover has risen, profits have not increased year by year, or even profits have been negative growth. This is one. The second phenomenon is that the assets of enterprises are constantly increasing, but the increase in assets does not represent an increase in turnover, nor can it represent an increase in profits. Especially in many enterprises, the more assets grow, the more negative they are. The third phenomenon is that there is profit but no cash. In general, money does not mean money, business profits, cash is not, that is, may arise. cash The problem of flow cut-off. Another phenomenon is that there is cash flow, but businesses are losing money. This is very prominent in many service industries.

Nowadays, in the process of pursuing profits, there will be some misunderstandings: gross profit margins are declining. The question is whether the decline in gross margin and gross margin is actually the result of competition, which means we have to lower prices or increase in cost during the period, resulting in an increase in management costs? Gross profit is less than cost. The company sells its products with profits, but profits are deducted because of the rising cost of the period. The enterprise has become the so-called "passing money God", and "profit" has only gone through a stage in the operation of enterprises. For a long time, the net profit of enterprises declined.

Chinese enterprises generally experience three stages of development:

The first stage is the start-up period. This period is about three to five years. During this period, two main problems need to be controlled. That is: whether the main business is mature and whether the client group is stable. The key to sticking to this stage is the need for a steady cash flow.

The second stage is the period of rapid growth. At this stage, the main task of the enterprise is to ensure the rapid growth of business and the good control of the ability to allocate funds. The interval is about five years. Many domestic enterprises have grasped the opportunity of the second stage to become bigger and stronger. We can use three verses to describe the enterprises that have grown up during this period: when you are in the stage of entrepreneurship, it is like a word written last night, "the west wind is withering trees, the tall buildings alone." At this time, the important thing is to stabilize the business ability. If this stage is ready, the enterprise has entered the second stage: "the clothes will be widened and the end will not be regretted, and the people will be haggard for Iraq". At this stage, we are still doing a good job, so the enterprise will go to a higher platform: "suddenly looking back, the man is in the shadow of the lights", that is, the enterprise is maturing.

This enables enterprises to enter the third stage of transformation. In the transition period, the growth rate of enterprises has dropped. Today many enterprises in China have reached the third stage. What are the characteristics of the third stage? That is, growth slows down and profits lose. Enterprises must develop new profit sources and market sources. The characteristic of this time is slow turnover and serious loss of net profit. Therefore, the fundamental problem for today's Chinese enterprises is to follow the law of enterprise development, keep pace with the times, and change at the right time.

Horizontal observation of world famous large enterprises has gone through such a process. No matter IBM or HP, they will undergo a revolution in fifteen to twenty years. During this period, Compaq did not have a DELL, and the company continued to expand. In such a transformation period, compared with Chinese enterprises, we are faced with three major problems:

The first big problem is that many of our enterprises have to overcome themselves. Entrepreneurship And the inertia of growth, many enterprises are moving forward to this road of no return. The reason is that they are still managing enterprises in the entrepreneurial stage. This typical characteristic is manifested in the blind pursuit of growth. Such enterprises do not consider the growth of effectiveness, but consider expanding blindly. This expansion is manifested in the possession of assets and resources. They think this is the growth of enterprises. What is the key to running an enterprise now? The key is to maximize input and output. Extensive operation has not matched the needs of enterprises, and has not been able to keep pace with the development of the times. The arrival of the information age indicates the accumulation of wealth, not just the possession of resources, not only the ratio of input to output, but also the speed. Therefore, the growth mode of enterprises needs to be changed.

The second problem is the misunderstanding of the scale of enterprises. Blindly pursue the scale, make the scale become the burden or even the burden of the enterprise, and the profit will be cleared up by its own scale. Therefore, enterprises should re recognize the two words of "scale".

The third problem is the turnover mentioned above. An indicator that entrepreneurs should be familiar with: sales profit margin. That is to say, how much profit can be realized in every one hundred yuan of sales. Now China has a very high voice, that is, "the coming of the high cost era", the price of raw materials is rising, the price of energy is rising, the cost of labor is rising, the land price is also rising. After the advent of the high cost era, the net profit of sales has been getting lower and lower. This decline in net sales has also affected China's overall corporate level. We can see a very obvious feature. Today, the vast majority of Listed Companies in China, the sales profit seven percent points, eight points, are lower than our country's GDP, which is lower than our country's economic growth rate. This fully illustrates. Our enterprises are not strong enough to create wealth. How to create profits?

　　 profit What is it? First we need to anatomize it from a profit formula: profit equals income minus expenditure. Our performance in the business is turnover, which reduces profits and costs. The turnover is from quantity, price or sales volume, so your turnover depends on sales volume and price. However, many enterprises simply pursue high sales volume, which may be caused by two reasons: many people think that sales volume, that is, turnover, will have profits, because the original profit margins are very large. The second idea is to have a blind mindset about sales volume. Sales volume makes us perform well, at least from the data, because the order that is not profitable is also done.

However, not all products can create profits. 20% of the products create a 80% profit, which is the famous "28 law". The quantity and price of products depend on the total amount of market demand, so for a product, the first thing is how to increase sales volume, finding suitable market is very important, and having the right market will have sales volume. Secondly, we must accurately price the products and segment the customers in the market. Especially in terminal enterprises, with the development of economy, more and more customers consider their psychological needs, such as brands and styles. Therefore, the pricing of products should pay special attention to the matching degree of specific markets. In conclusion, business income is the embodiment of the connection ability between enterprises and the market. There is a certain degree of increase in the turnover of an enterprise. We call it the node of the enterprise in the development of turnover, and the problems faced by enterprises are different at different nodes.

While the turnover is rising, the cost of the same period may be even greater. Because of the increase in turnover and the expansion of enterprise scale, the system management capability of enterprises is not matched. Some enterprises do not make profit calculation when they blindly expand, and the expenditure will only lead to a faster loss of profits. The runaway of expenditure is caused by insufficient control ability of enterprises. Its performance is: first, the disorder of the operation of enterprises, that is to say, there are problems in the operation of enterprises, and every time they start from scratch, every management can not be duplicated. Orderly management enables enterprises to replicate in management, and management cost is bound to be controlled. Two is the lack of pre control. A healthy enterprise, the year-end profit guarantee is an effective control system. This is the pre control degree of enterprise management and control. Enterprises create profits not only to pay attention to profits, but also to pay attention to the cost of the period. Enterprise management needs pre control, revenue is turnover, expenditure is cost and expense. Only by finding a balance between these two problems can we achieve a good profit balance. Income and expenditure are equally important and are important parts of supporting enterprise profits.

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