Profit improvement is both a short-term and long-term activity.

In the short-term, you will do well to focus on:

• having the right structure in place;
• the best people;
• great processes;
• in-demand products; and
• the right customers.

See the videos on Improving the Top Line and Improving the Bottom Line for more on those.

The purpose of this video is about the longer-term profit improvement goal of waste mitigation.

Waste refers to elements within your business that do not perform a value-adding role. They aren’t things that your customer would appreciate or be willing to pay more for.

All businesses have waste. However, the extent of waste can differ dramatically.

Long-term waste can be hard to find and is commonly referred to as invisible waste.

To get rid of it, you need to understand where it can be found, how much it’s costing you and how it can be reduced or eliminated.

This task is both a simple and complex thing to do.

It’s simple in that there is an over-arching framework to follow, with simple tools to use to help identify waste.

It’s complex in that successfully implementing long-term waste reduction generally requires everyone’s involvement.

During the transformation into a waste eliminating culture, managers and employees alike need to learn how to consistently communicate effectively on continuous business improvement. This likely means that learning programmes need to be deployed, particularly to help managers engage differently with employees, transitioning from more traditional managers to facilitators of action and improvement.

Ultimately, to reap the full benefits of profit improvement managers need to go into it committed to a long-term process. That’s not to say short-term benefits won’t be found.

So, what type of culture with regards to waste elimination do you have?

• Does your business accept that some wastes just happen?
• Do excessive costs, outdated processes or slow decision-making go unresolved for far too long?
• Or, are each of your employees’ champions of waste reduction?

Take the spam-free Profit Improvement Diagnostic to discover your top three strengths and weaknesses with respect to profit improvement.

Of the three key areas of profit improvement, cost management is usually the quickest to produce results.

The first thing you absolutely must have within a strategic cost management system is a superb accounting system. A system where your accounting records are accurate and up-to-date, almost in real-time.

The next things you should have are a budgeting and forecasting system. The budgeting and forecasting systems should be used to strategically fine-tune what your business’ financial position should be. Ultimately, these should help you gain clarity about your intended profit and return on investment.

In conjunction with this, benchmarking should also play a vital role. You should be benchmarking against your prior performance, competitors and best-in-class operators of other similar risk industries.

From these things, you will identify areas where improvement opportunities exist to increase profitability.

Actions which you may need to take include negotiating with suppliers, investigating and selecting alternatives, eliminating, optimising processes especially with AI and Robotic Process Automation, and enhancing recruitment and retention.

Very importantly, a strategic cost management system assigns responsibilities, incorporates accountability and has regular reviews.

Besides cost management, to seek further profit improvement you need to turn your attention to profitable revenue growth and waste reduction. The videos on Improving the Top Line and Business Waste provide further information about these other two key areas of profit improvement.

We now invite you to take the spam-free Profit Improvement Diagnostic to discover your top three strengths and weaknesses with respect to profit improvement.

When you’re ready for help, we look forward to the transformation we will achieve together.