There are many ways to determine if a business is in profit or loss. The most effective way of obtaining the profit and loss status of an organization is referring to its financial statements. The balance sheet is a financial statement which gives a clear idea of the financial status of a firm. It comprises the bottom line, which is the last line in the audit, and is a critical point regarding profit or loss figures.
What is a Business Bottom Line?
Fundamentally, it is the amount of profit and gain realized after all the expenses and taxes have been paid off. Because bottom lines begin with the gross sales and then deduce taxes and disbursements to assert the net profits for a quarter, investors are able to promptly find out the current fiscal status of the organization. It sums up all the information, which is why, it is possible to know if a company is earning any net income from the business venture or whether the operation is presently functioning in red.
The bottom line can be a reason for rejoicing or can render motivation to make some modifications in the company operations and processes. When there is little or no net profit earned, the organization generally takes steps to better the profitability of the business. Depending upon the situation, the strategy and plan to increase profits might initiate from the management of an organization.
How to Increase Your Business Bottom Line?
Introduce and implement strategies that will provide appropriate solutions to people’s problems and needs. You are required to create marketing strategies which would effectively cater to the wants and needs of the public. Conduct a regular follow-up with people who may need your help and support. Maintain healthy relations with the public, marketing professionals, advertising agencies, and most importantly, your clients and customers. By doing so, you will get good business due to referrals from clients and customers who are satisfied with your services.
As the bottom line is the amount of profit earned after all the disbursements are paid back, a logical approach to meliorate it can be lessening the amount of resources that are related to covering expenses. Generally, this step includes a cut in departmental budgets, or at the very least, terminating discretionary funds which are called upon to deal with the expenses not covered in existing budgets. The cost cutting measures may also be supported by eliminating positions and combining responsibilities, cutting back on overtime allowances, and changing required number of full-time posts to part-time.
Along with the measures to trim the expenses and improve financial planning, the bottom line is usually raised by introducing and incorporating new revenue streams for an organization. This may include launching new products and services, or creating a new market for the existing line of products. The management tries its best to cut down on expenses, and implement new methods and strategies to attract business and increase income.