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How People Affect The Bottom Line

People affect bottomlineThe triple bottom line is one of the principles of sustainable business that gives weight not just to making a profit, but also to being responsible for how a business impacts people and the planet. In short, it looks at people, planet, and profit in all business considerations.

The financial component is the one most are familiar with because it has traditionally been the only part that a company has to be concerned about. The concept of natural capital has gained increased attention as we realize that many of the natural resources we take for granted are not going to be around forever.

The “people” part is really about human capital – the people who actually carry out the work of the company, as well as the people who are impacted by the company (this is the part that puts the “social responsibility” in CSR, corporate social responsibility).

Companies that put people first realize that it’s good for business. Some early research suggests that green businesses may have happier employees – employee productivity may actually increase when people feel good about the sustainability initiatives of the company that they work for.

What Does This Mean for Your Business? Remember that your business is all about people. The more that you can do this, the more that you will build goodwill and loyalty among the people who make your business possible. In turn, this will help your business to be sustainable for the long-term.
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Financial Key Performance Indicators To Gauge Your Business’ Health

KPIYou may have a gut feeling that your business is humming along smoothly — and you might be spot on. But there is no substitute for concrete numbers when it comes to measuring your business’ financial health. That’s where financial KPIs — key performance indicators — come in. KPI is a blanket term for the types of markers that businesses use to measure performance in a variety of areas, from marketing to HR to finance. Keeping close tabs on your small business’ financial performance is essential to long-term success. These financial KPIs will help you answer the question: Is my business meeting its goals?

  • Gross Profit Margin : Your gross profit margin tells you whether you are pricing your goods or services appropriately. Your gross profit margin should be large enough to cover your fixed (operating) expenses and leave you with a profit at the end of the day.
  • Net Profit : This is where the rubber hits the road. Your net profit is your bottom line — the amount of cash left over after you’ve paid all the bills. Financing is also a possibility to help smooth out seasonal fluctuations. Many companies go this route to keep things moving during the down season.
  • Net Profit Margin : Net profit margin tells you what percentage of your revenue was profit. This metric helps you  project future profits and set goals and benchmarks for profitability.
  • Aging Accounts Receivable : If your business involves sending bills to customers, an accounts receivable aging report (most likely a standard report in your accounting software) can be eye-opening. Invoice financing is also an option that can help you capitalize on outstanding invoices.

Thrive knows the importance of your business’ health.  Let Thrive monitor your KPI so you don’t have to and you won’t have to question if your business is meeting its goals.

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Using Metrics To Increase Profitability

Measure only what you monitor, and monitor what you measure. The bottom line is that if you don’t manage your business, it will manage you. If you’re aiming at nothing, you will hit it with huge accuracy! One of the main reasons so many small businesses fail, is the owners simply don’t know how or what to measure, or even when. Using metrics will help increase your business’ profitability. Gross-margin

Gross margin is an important metric to understanding profitability. Gross margin helps identify variances in production costs or inefficiencies in managing labor costs. Reviewing this metric over several intervals will identify where inefficiencies occur or where costs can be lowered and/or re-negotiated with suppliers. The gross margin is also impacted by sales price and validates when changes are necessary. profit-margin

Another important measure is net profit margin, which illustrates the portion of profit generated from each sale. This is likely the most vital data point in understanding profitability. This metric reveals efficiencies, economies of scale, as well whether or not your overhead expenses are in line with your performance. Cash flow balance

Most business owners are very aware of their current cash balance; however, they typically do not understand the dynamics of their cash flow. Part of your statement of cash flow, the cash flow from operations line, describes the cash being generated by the business operations, over a defined period of time. While a company may show a positive trend with net profit margin, a negative trend in accounts receivables or lack of management of accounts payable, can easily alter the cash flow of a company. So many times, an owner says “My income statement shows that I am making money but I don’t understand why the cash isn’t there”. Since cash flow problems are most typically the culprit of failing companies, you can see why this metric made the list of those most important to track.

How can Thrive help?

Thrive provides a way to help track your business’ profitability utilizing metrics like these so that you can focus on your team and continued successes.