A business either earns profits, or they don’t. Whenever a business fails to earn a profit, it’s reflected in the P&L Statement as a negative number.
Profit Losses are negative profits that are always a problem. They are business threatening when they involve negative Gross Profit. Cash flow is challenging when negative Operating Income exists and a business ownership problem when Net Income is negative.
Manage your profits through your profit plan so you don’t have to deal with the immediate stress that occurs for ownership when a business reports a loss.
Overview
Profit losses encompass business issues, waste, poor productivity, failed actions, and missed profit opportunities that cost you money. These losses typically manifest as lost sales or unnecessary expenses that should have been avoided that you now get to pay for out of profits. The key to stopping profit losses is identifying and quantifying the actual problem costs and opportunities lost in the business based on their calculated profit impact.
All wasted or lost cash costs you both cash reserves and profits. Every profit failure drains your bank accounts and puts your business at increased risk each time you fail to make money on a sale. Profit Losses are best identified through the leading and lagging metric “misses” monitored in BusinessCPR™ Management System Step 3–Confirm the Quality of Your Profits.
It’s imperative to your business’s survival to stop any loss that significantly impacts your cash quality and velocity. Fail to correct the things that consistently go wrong in your business increases the potential for waste and inefficiency that costs you money. Every time you lose money, you drive up costs that cost you profits and cash.