The Problem: Rapid growth over a two-year period, but management of gross margin, operational expenses, and lack of strategic planning limited future expansion.
Analysis of Alternatives: Implement a system that integrates with POS to have better overall real time
reporting. Develop a Budget with achievable goals that are measured monthly against actual results. Hire an external Consultant or in house Controller to manage the accounting & reporting functions
Recommended Solution: To minimize the additional cost of a completely new system or the headache and cost of hiring a new staff, a middle investment approach was selected. A complete review of the financials was completed to identify key revenue and cost centers, and a budget was developed with targets that managed expenses to optimize profitability.
Implementation: Develop a budget that focused management on four key revenue streams that then could be directly linked to costs to determine which revenue streams were most profitable. Once profitability was determined, the focus was to ensure that a bonus and KPI structure was put in place to reduce staff turnover and improve overall customer service.
RESULTS: The budget provides management a metric to track their effectiveness against monthly results allowing for strategic changes to be made to ensure target profitability is met. Management can now evaluate their gross margin with a better understanding of what components comprise their cost per sale. Overall, the team was able to increase sales by 10% and net income by 5%.