Revenue Management: 4 Priorities to Stimulate Growth
It’s safe to assume, as a business leader, you want your company to be profitable. To accomplish this, you must make revenue management a priority across the organization. But revenue management is more than just paying your bills on time and collecting on your invoices.
Increasing your revenue is simply a matter of bringing in more money than what is going out, right? We all wish it was simple, but there are steps you can take for better revenue management that will positively affect your bottom line.
Revenue growth is listed as the top priority for wholesale distribution firms in 2018. We’ve put together four priorities for better revenue management that help foster growth:
- Get organized
- Shorten your financial close
- Lower costs
- Develop a data-driven strategy
Eighty-one percent of accounts payable professionals describe financial visibility as “critical” or “important” to controlling their cash.
The first step to improving any process is to assess what you currently have in place. Your business finances are no exception. If your company is lacking an effective process for maintaining accounts payable, accounts receivable, cash flow and other records in a way that provides a clear picture of your revenue stream, it’s time to develop one. Here are a few steps to consider:
Conduct an internal audit on your finance and accounting processes
Where are the holes in your finance and accounting business process? How easy is it to access information? What systems and processes are currently not connected, but should be?
Prioritize your learnings
What is the most important first step to take? Is it focusing on your days sales outstanding, or better financial reporting? Hiring someone new, to fill a skills gap?
Automate where you can
Automating manual processes streamlines operations, cuts costs over time and allows employees to focus on more strategic tasks. A financial management system automates manual processes, providing you with greater control over your company’s cash flows while enabling visibility and better collaboration.
Consider hiring a consultant to help you implement better revenue management (and the steps along the way to get there). This is particularly helpful for growing businesses that need fast solutions.
Shorten your financial close
The key is to develop an efficient process. For most businesses, that involves using software that will manage all aspects of the closing process. You’ll need to assess your company’s needs to determine which system will work best. Consider one that integrates financials with other business operations to avoid reconciling multiple systems. Having all company data in one system streamlines operations and means it is available for employees in a single location.
Once your company has chosen software for faster financial closing, it’s time to review your processes to find any areas that can be optimized. Use the tools your new software provides to automate any manual processes. Make sure to conduct testing, and outline a roadmap for processes and functionality.
Cross-train your employees throughout the implementation process. Having only one or two people in charge of a specific task in the closing process is useless if those people are unavailable for any reason. Ensure that while the process runs smoother with them, it’s able to be completed without them.
Lower your business costs
Take a deeper look into company spending. It’s estimated that most companies waste about 30 percent of their expenditures on items that don’t impact their customers. But slashing budgets isn’t easy or indiscriminate – cutting costs requires business leaders to make a deeper, analytical assessment of where the company is spending.
First, highlight any unnecessary or duplicate costs. Are you paying for expenditures that should have been removed from the books years before but haven’t due to oversight? Then, examine whether any services should be reconsidered. For example, does your company contract accounting services to an outside provider? Consider if bringing those in house would save on fees or other costs.
Next, improve your cash management. Performing a cash-flow analysis will illustrate your business’ financial cycles and sales patterns. Recognize when your business slows down – maybe it’s during the winter, or around holidays. Adjust your marketing efforts to target new potential customers and reduce borrowing when business slows, and ensure you’re at proper staffing during busy times.
Additionally, review the terms of payment between your customers and suppliers. If the period for receiving payment from customers is significantly longer than that of many of your suppliers, your business is unlikely to have a strong cash flow at any given time. Work on closing the gap. Use a financial system that has proactive collections tools to improve days sales outstanding. While this ratio may fluctuate due to your company’s sales cycles, utilize tools that will drive customers to pay their bills on time, such as automated payment reminders and expedited daily transactions.
Finally, set financial goals and make them a companywide priority. Task department heads to find areas within their operations to contribute to a better cash management strategy as an organization. Encourage departments to work with one another to reduce spending and develop cooperative efforts.
Develop a strategy
Once you’ve assessed the changes your organization can make to improve financial health and revenue management, set attainable goals for growth. This involves analyzing data to review whether the changes you’ve made are working, and whether further optimizations are needed.
Establish what goals are realistic and measurable. Create them with an understanding of your business’s current workload and production. Benchmark your business against competitors. Apply this information to determine potential paths to achieving these goals, whether its automating manual processes, reviewing your finances more frequently or reorganizing your cost-revenue structure.
Once these processes are established, conduct regular analysis. Technologies and industries change, and processes that worked efficiently before can be improved to scale with you. As your business grows or expands, you may outgrow certain technologies or processes. As you achieve your business goals, evaluate and set new ones.
Businesses serious about growing their revenue understand the state of their financial affairs. The path toward revenue growth is continuous. Once your organization takes necessary steps to establish a healthy financial system, maintain and revise the processes needed to preserve financial health and revenue growth will follow.