Q: I have a small business and I would like some direction on how to improve profits.

A: The normal tendency is to not pay enough attention to controlling cost, but placing all the attention on sales without knowing the real cost.

The old adage that increasing sales solves all problems is obsolete and never was the correct way to run a business. It can be very dangerous to concentrate on sales without giving equal attention to all other areas of cost.

To put all factors into perspective, I’m sure that when you purchase a car you are looking for as many features as you can get. You want the car gauges and electronic systems to tell you what is not working correctly.

You need to do the same for your business. What that means is that you implement the controls necessary to alert you of any areas that need attention in a timely manner.

A word of caution. Do not rely on your accountant to control your cost. Cost control is the owner’s responsibility. The accountant can certainly help you in developing a statement that will provide you with data that will identify each area and its performance.

With technology’s advancement your accountant can help you select software that will give you the necessary information on daily, weekly or monthly basis. The sooner you know that conditions are drifting the quicker you can make corrections. Your accountant will not be offended since you are making his or her job easier and less cost to you.

Sales are necessary in the growth of any company. It is also equally important to monitor profits so that corrections can be made in a timely manner.

To insure that you are generating the most profit from each dollar is to relate all expenses as a percent of sales. Your accountant can help you with the current percentages for your industry. Just because the industry is a certain percent does not mean that you cannot do better. It is more important to monitor your expenses as a percent of sales rather than just looking at profit. Just because you are satisfied with the profit does not mean that the company is operating at the least cost.

If you have employees, it is important that you communicate with them so that they understand what is expected from them to insure company growth with optimum efficiency.

If your product or service is highly competitive your profit margin will be small, consequently close monitoring is even more critical.

In summary, if you monitor results closely, implement corrections as needed, work with your accountant and communicate with your employees you are doing what is required to achieve maximum results.

SCORE is here to assist you. Call 962-0122 to set up an appointment. The information and session is free.

Bob Christianson is a counselor for Northern Illinois SCORE