Finance & Business Intelligence: Optimize the Return of Your Supply Chain

Running a chain doesn't always lead to profit through growth. While growth is important, an organization may expand too quickly or in the wrong locations, or inefficiencies may increase. This can put pressure on the organization. When looking for ways to improve your chain’s profitability and cash flow, it is crucial to have a clear insight into your company's results and to consider both top-line and bottom-line strategies. We would be pleased to guide you through this in our finance workshops.

Top-line techniques

Top-line basically means realizing growth at the top of the income statement. This can be achieved by increasing revenue per customer or the number of customers. There are various possibilities to increase revenue, here are a few examples:

• Intensify promotional activities
• Add new products and/or services to the current offering
• Increase prices
• Improve product quality to enhance brand image and reduce return sales.
• Etc.

The best option for your chain depends on the industry you are in. For example, a beauty salon might have the opportunity to open extra hours on Tuesday evening to generate additional revenue and attract more customers, whereas for a clothing store, this might not be realistic due to insufficient foot traffic in the shopping street. The way to create a better return in a franchise varies greatly per industry.

Bottom-line techniques

Many chains have a solid customer base and good revenue at their locations, but can still struggle to make sufficient profit because their costs are too high. Focusing on numbers to reduce costs, minimize waste, and automate labor-intensive activities in the organization are ways to improve profit.

Automation

Automating routine tasks can significantly reduce the number of people needed to complete a service and manage a (franchise)chain. By automating essential but repetitive and everyday tasks such as invoicing, scheduling, online payments, etc., you can lower the required labor input and/or employees and possibly franchisees can use their time and expertise for important aspects such as improving the quality of service. 

Using the right tools for process automation, chains can benefit from processes regarding:

• Marketing and sales, for functions like email, social media, reporting, and tracking to optimize efforts
• IT, such as automated maintenance and status reports and a ticketing system
• Administrative tasks, such as automation in accounting systems financial dashboards with management information based on KPIs, KRFs, and KSFs.
• Logistics, a company often seeks support in routing, labeling, ordering, and tracking shipments
• Human resources & franchise management, for onboarding employees and franchisees, contract management, file formation and for employees’ benefits and payroll processing.

Ways to reduce costs

There are many other possibilities to reduce costs as a headquarters or a location, here are a few examples:

• Evaluate staff planning. Review schedules, staffing, and overtime and consider where changes can be made without negatively impacting the customer.
• Optimize inventory management
• Analyze all current expenses; are they still necessary/relevant, and is purchasing still competitive?
• Analyze marketing activities. Does the current marketing approach still consist of the optimal mix, or are there possibilities for optimization?
• Etcetera.

Franchisor's duty of care

One of the reasons a franchisee joins is because they have an advantage over the 'regular entrepreneur' in terms of brand awareness. This often results in higher revenue and a higher number of customers compared to the regular entrepreneur. On the other hand, a franchisee benefits from cost savings, efficient process and procedure setup, and the experience of the franchise organization. If the above factors are not properly set up, it is your duty as a franchisor to work on this due to your duty of care towards your franchisees.

This is also important because franchisees often work so hard in the business that they don’t work sufficiently on the business. Frequently, they have no idea what it means for their income if extra revenue is generated. For example, by helping just one extra customer each day or consistently offering a certain additional product or service to the customer. It’s a pity because (often) simple actions can greatly improve returns in a franchise.

Optimizing cash flow

Just as important as the fundamental profitability of the organization is managing cash flow. A company can seem very profitable on paper and still go bankrupt because the organization invests so much in growth that there isn't enough money to meet all financial obligations. This is when a company grows itself into trouble. In such a situation, there are three possible solutions:

1. Grow slower
2. Seek additional financing
3. Optimize cash flow

The last option is the best but also the most challenging. Growing slower costs money in the longer term, and additional financing also brings additional financial burdens. Optimizing cash flow is achieved by implementing strategies to get customers to pay sooner, which may require significant adjustments in the business model. Additionally, it also involves paying suppliers later, which, if done incorrectly, can put important collaborations under pressure.

Enhancing financial success

Success is a moment. You can lose it or enhance it further. The development of a chain must always continue. New opportunities must be seized. By consciously monitoring your financial results using Business Intelligence and then adjusting based on the data, this can be achieved.