Slow Profit Leaks; What Does It Mean For My Business?

Mar 13 2019
POSTED IN Tips and Tricks

Every business owner knows how important it is to analyze their business. This not only allows owners to see what aspects are doing well, but also points out what may need to be adjusted to remain/become even more successful. However, time and time again, business owners are looking at their businesses and are unknowingly overlooking Slow Profit Leaks. These leaks seem very minor and obscure at first as they are not always noticed. But, if left unattended for long periods of time, these leaks can add up to waste thousands of dollars. It has been estimated that Slow Profit Leaks can erode 3 – 7% of gross margins. In other words, that’s 3 – 7% that if addressed, can be transferred straight to your bottom line. For some companies, that is hundreds of thousands of dollars that they could reclaim, rather than waste!


Major Slow Profit Leaks That Must Be Addressed


Poor Costing

Poor costing is one of the more obvious areas of concern because everyone wants to price items for sale correctly. When you are buying materials and paying for labor to manufacture something, it’s crucial that you know its proper worth. Selling something too cheap may mean your business will not generate enough profit, while selling something at a high price, may cause consumers to not buy from you. In fact, there are three important questions to ask yourself if you would like to look for possible Slow Profit Leaks where costing is concerned. And depending on your answers, you may find that you need to reconsider your pricing or where you are buying materials from.


  1. After currency conversion, freight, duty, and the internal carrying cost of inventory, how much do imported goods cost? Do current prices successfully account for this number?
  2. Are you aware of what it truly costs to manufacture each product or component that you offer? Again, do current prices successfully account for this cost?
  3. Do you know which products account for the most sales, and which do not? If some are performing poorly, it may not be financially worth it to continue to stock those items.


Productivity – Pauses

How productive is your company? Many may assume that if sales are high, they are being extremely productive. Financial success should be taken with a grain of salt, as there could be room for improvement. With this being said, even if you generate two million dollars in annual revenue, there could be hiccups that are costing you in productivity and time. Meaning, your revenue could be even higher. So be sure to look at your processes and analyze whether they are in place because they truly encourage productivity. Commonly, business owners find that particular technology or operations are merely used or performed because “that’s how things were always done”!


When you don’t challenge whether something truly helps productivity, you may be allowing outdated or slow tools to slightly hinder success rather than boost workability.



How accurate are your distribution and shipping methods? For many businesses, this is where a large portion of their leak happens as these mistakes could seriously add up over time. From incorrect orders to back-order items and increased shipping costs, there are many ways your business could be losing money without you realizing it! So be sure to look at every point of the shipping and distribution cycle and analyze how it is working. Many find that after doing this, the paper processes that they use are not up-to-date and are incorrectly filled out, or that their inventory counts are too small to help them grow. Remember, when in doubt, look at the numbers and account for every lost dollar.


The Use Of Dead Reports

How new are the tools that you’re using to complete tasks? As mentioned briefly, old tools or technology could be harming your productivity and ultimately your bottom line. Be sure to look at whether your software is up-to-date and can efficiently complete all of the tasks your business requires. One example that is worth noting is the use of paper reports in an era where technology and innovation can allow for instant mobile-reports. As paper reports are often considered ‘dead’ or outdated the minute they come off the printer, a successful business can’t solely rely on them. To be successful and to be able to make proper decisions, you must use technology to your advantage and use electronic or mobile-reports so no matter when or where you are, you have accurate information.


Repetitive Data Entry

Doing repetitive tasks can leave you exposed to errors as mistakes can happen without anyone noticing! This is one major problem for businesses who still physically enter data across multiple platforms because their software platforms do not “speak” to each other. Simple errors in addresses or inventory count could lead to incorrect orders being shipped, and lost shipments as faulty information is unknowingly relied upon. Simply changing your software to limit the need to manually input data repetitively could save you thousands of dollars in errors but only cost you the time it would take to replace your old software.


Using Excel For Reports

And finally, if you’re still using Excel for reports, you need to stop, now! There are easier ways to do things and we know that ERP software is the new Excel as it can instantly and efficiently create up-to-date reports. Reports shouldn’t have broken links, old formulas or partial information; they need to move past these inherent issues of Excel. Not to mention, a lot of software integrated within ERP can limit the need for repetitive actions like data entry.


In Summary….

Do any of these situations seem familiar to you or are you just unsure about where a Slow Profit Leak could be dripping in your company? Don’t wait! Get in touch with a Mantralogix Representative today! We’ll work with you and walk you through all of the ways your business could unknowingly be losing money. You may have thousands or hundreds of thousands of dollars waiting to be claimed!

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