Profit Planning
My new article about Profit Planing.
Introduction
Profit
planning process in business is directed to:
1.
maximization of profit in appliance with resource
potential and market conditions;
2.
ensuring the optimum ratio between the value
of formed profits and the level of risk;
3.
fulfillment of obligations to investors,
creditors, owners, governmental organizations;
4.
to earn own financial resources, that is
needed to realize business development strategy
5.
ensuring of increase the market price value
of the company
6.
stimulation of the staff in solving other
tasks (Планирование прибыли/ http://www.grandars.ru/college/ekonomika-firmy/planirovanie-pribyli.html).
Therefore,
we can see above that profit planning is one of the major fields of work in any
kind of business. You could not effort to make a good business with high index
of profit without good finance plan. As we know from related literature
financial plan as well as marketing plan must be submit in the beginning of
every year.
Marketing
plan is mostly targeting in grow the market and customer base. In that plan, we
could see new market researches and new products. Nevertheless, financial plan
is working only with accurate financial data. Profitability management is the
part of general finance plan. However, it is independent part. How shall we
make our profit plan and which kind of planning we have? We will talk about
profit planning more detailed in next part of our paper.
Solution
Profit does not just happen. You have to plan
for it and actively make it happen by increasing revenue and decreasing costs.
All too often in farming, the familiar profit formula looks like this:
Income
– Expenses = Zero Profit (or the “Profit” might even be negative).
(Planning For Profit/ http://www.nebeginningfarmers.org/farmers/achieving-profitability/profitability-tutorial/planning-for-profit/)
Profit
planning is the process of developing a plan of operation that makes possible
to define how to organize the operational budget so that the maximum amount of
profit could be organized. Profit Planning is one of the main processes in
every company because profit is the reason of business.
The
actual process of profit planning involves looking at several key factors related
to operational expenses. Putting together effective profit plans or budgets
requires looking closely at such expenses as labor, raw materials and upkeep,
and the cost of sales and marketing efforts. At close look, we can define that
main unit that is responsible for profit management is sales department.
Understanding of that fact is give us opportunity of management the price
policy of company because; exactly sales unit is ruling price policy in the market.
There
are several advantages to engaging in profit planning. Most necessary field in
increasing profit of company is reporting management. If company does have all
general reports, management could take right decisions for company’s future
development.
Necessary
changes, which may be uncovered as part of the profit management process
includes increasing or decreasing the employee force, changing vendors of raw
materials, or upgrading equipment and machines that are key to the production
of goods and services. In this manner, the need to restructure marketing
campaigns so that more resources are directed toward strategies that are
providing the greatest return, while minimizing or even destruction allocations
to strategies that are not producing significant results, may also become
apparent because of this type of planning. Even issues such as changing
shippers or making slight changes to packaging that trim expenses may be detected
as part of the profit planning process.
While
this is a useful process in any business setting, there are some limitations on
what can be finished. To reach target that you planned you must have good
planning. Planning process based on data. If you do not have correct data you
will never make right plan to achieve the goal. That is why correct and full data is so
necessary in process of profit planning.
Conclusion
Peter Drucker has rightly said, "Profit is a condition of survival.
It is the cost of the future, the cost of staying in business”.
Profit planning is one of primary process for business world. Only if you
have all necessary data, full reports and process that gives you opportunity
for permanent comparing of all data you can achieve your financial goals.
Profit plan is also main road map for persons who are responsible for sales and
cost policy and by reports of this employee’s management could stay in touch
with process of earning the profit of company during all period.
In the end of my paper, I would like to give my favorite quote from Tomas Hobbes
about profit: “In the state of nature profit is the measure of
right. (Thomas Hobbes, 1651) “.
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