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Long pending outstandings takes a big hit on the profit. Track the bill receivables age wise.
Similarly track the stocks piled up age wise and average sales cycle product wise.
Over all cost of selling must be reviewed regularly to maintain healthy bottom lines.
The main goal for most businesses is to earn a profit. Generating profits in a business environment often indicates that an organization is offering goods or services desired by consumers at a reasonable price. Developing a strong clientele and a competitive advantage against other companies in the market may require much time and effort on management's part as it seeks to produce desirable goods or services that produce profits. Business organizations that cannot complete these functions may face the prospect of losing money from their operations and dealing with the consequences of financial loss.
Profit Allows for Growth
A positive effect of companies generating operational profits is the ability for companies to expand and grow their operations. Companies often reinvest a certain amount of profits earned from current operations into new business opportunities or expanding current operations to increase business output. These opportunities are usually taken on so companies can increase their market share in the business environment and generate further profits from expanded operations. Companies may also choose to enter foreign economic markets to take advantage of potential profit opportunities in developed or emerging economies.
Profit Improves Employee Livelihood
Business profits often allow companies to improve the livelihood of their owners, managers and employees. This may include increasing compensation levels and offering performance bonuses or additional vacation time. These rewards may also generate positive goodwill with employees. Employees may be willing to work harder and increase their efficiency to achieve more profit for the company. This symbiotic relationship allows the business to generate more profits from business operations and pay a fraction of these profits to employees based on their performance.
Loss Reduces Operations
Losses resulting from business operations have the opposite effect of profits. Companies facing a reduced market share from lower consumer demand or a downturn in the business cycle may be forced to reduce operational output. This reduction may include laying off employees, selling equipment or assets and closing underperforming business facilities. Companies may need to take additional measures depending on the consistency of business losses and whether their initial reduction methods have lessened the impact of operational losses.
Loss Leads to Bankruptcy
Consistent business losses may force the company into bankruptcy. While many businesses try to avoid bankruptcy by selling the business to a competitor or securing additional financing to continue operations, bankruptcy may be the final option. Underperforming small businesses may require the business owner to declare personal bankruptcy, depending on how the company is organized. Business bankruptcy may be a long and arduous process, depending on the size of the company and other aspects relating to business operations. Declaring bankruptcy may also create an economic ripple affecting other companies in the business environment.
Thank You Mr Amir for the useful informatrion. However, we need to put brainstorming points of ` What are the reasons for the regular loss, in spite of the high and regular sales.?
