An entrepreneur should have established a short or long-term business vision and mission. To develop their business. One way to develop the business further is to keep increasing the operating profit.
Operating profit is the excess from sales minus the costs and expenses of producing products and services. Entrepreneurs should be able to manage and manage the finances of their business, including managing their business profits. Here are 10 tips and ways to manage business profits so they keep growing.
How to manage operating profit
Understand financial management
The finances of the company should be well understood by an entrepreneur. Some things that need to be understood include the entry and exit of money and goods, the price of buying products and the price of selling products, the cost of production, the cost of production, and others.
In addition to understanding this financial management, a report is also made. The purpose of this report is to make it easier for you to find out how much money is going out and how much money is coming in.
Total Operating Profit Calculation
After preparing a report on expenses and income, the number of purchases and sales of products, the next step is to find out the profit of the company. To determine the operating profit, the total cost of the product must be determined. To find the COGS or product cost, all raw material purchases and all production costs must be added together.
After you determine the cost of the product, the next step is to add it up with salaries, rent, and other expenses. Then the sales sum is reduced by the sum of the COGS with all operating expenses.
Separate company funds from personal funds
As a beginner in running a business, many sometimes do not separate personal money from company money. Therefore, they are limited in controlling their finances and developing their business. The business also becomes a local street or does not develop at all.
One way to separate personal finances from businesses is to separate their bank accounts first. This also makes it easier for you to calculate the company’s annual financial statements.
Use of part of the profits for capital turnover
Capital in business is important. Working capital is a means to start a business or develop your business. At least when the business is up and running, capital must continue to rotate and even increase in number.
If the initial capital is 1 million, the capital must remain in the next month in the amount of 1 million rupiahs. Even if the company is profitable, the capital needs to be increased. You can use this capital to increase the supply of raw materials to increase the production volume for your company.
Business success is the amount of business capital, which is further increased by the monthly operating profit. You must leave at least 45% to 50% for increasing your venture capital.
Use profit sharing to grow your business
The next way to manage operating profit is to use part of the operating profit to develop your business. Set an amount each month to grow your business. For example, 10% to 15% of the company’s net profit every month to develop your business.
Business development can consist of adding tools, increasing the number of human resources, increasing business promotion, or adding new branches. It all depends on your choice and the state of your business. If your product has many fans out of range, you can add stock and add new outlets.
Use of part of the profit for the reserve fund
The state of the company will experience a difference every month. You have to think about the possibility that your business will suffer losses and even go bankrupt. To avoid running out of funds in bankruptcy, you can overcome this by leaving some profits for reserve funds.
At a minimum, you must set aside about 20% for reserve funds or mutual funds. You can use this money to buy real estate like vacant land, houses, savings, or gold. By leaving funds for investments you can still have something to resell and later you can still have money for life.
Use of operating profits for social funds
Your business is not just your hard work, some employees help you, and some loyal customers use your services and products. As thanks for the results you get, you should leave some profits for social funds.
At least 10% of the operating profit must be used for social security funds. You can use this money to help flood victims, and set up educational institutions such as Islamic boarding schools and others. It all depends on your willingness to give the funds.
Use of a portion of operating profits for personal use
You can enjoy business success by using it for your personal needs. Use part of the operating profit for daily needs such as food, entertainment, housing, and others.
The use of corporate funds can be fixed at only about 10% of the operating profit generated. Don’t allow all your business profits to be used for personal gain only. As discussed above, allocate operating profit for these items and about 10% for your personal needs.
Find ways to further increase operating profit
In addition to managing operating profits, you need to think about how to increase business profits. There are many ways to increase corporate profits. For example, by increasing inventory, increasing promotions, preventing theft, and others.
Of course, you must learn how to increase operating profit. This will increase funds for private funds, social funds, reserve funds, and others. By increasing the allocation of these funds, your business will continue to grow.
Continuous improvement of enterprise quality and service
Product quality is very important to the health of your business. All consumers will only continue to use your product if your company’s quality and service are maintained and even improved for the better.
Customer satisfaction and loyalty will certainly affect the operating profit you will make later. The more operating profit you make, the more funds you can allocate to the above things.