Profit Blog

Achieving the company's financial goals must be based on PROFITABLE GROWTH, which requires that the company's financial management conditions are in order. When a company has the conditions for financial management in order, this means in practice that the company knows what results the company can achieve with its current investments and current products and services. By internal services, I mean the services needed in the company's business, which the company can either produce itself or purchase from an external supplier. Such services include, for example, maintenance services and financial management services needed in the company's business. Should the company produce the necessary internal services itself or purchase them from an external service provider? There is no single correct answer to this question, because companies' businesses and their situations are different. No two cases are the same. For this reason, giving the correct answer requires investigating the matter on a case-by-case basis. As we know, conjecture is not worth knowing. In the following, I will examine the matter from the perspective of the company's financial management. When I ask companies whether their internal services are competitive, the answer is always that the internal services my company needs are competitive. When I next ask companies for the reasons for the answer given, the reasons for the answer are always as follows: for example, a company that needs maintenance services in its business. When my company needs to replace a burnt-out lamp, for example, it costs 30 euros when replaced by my company's internal maintenance service. When I buy this service from an external supplier, it costs 90 euros. This comparison is incorrect. In this case, the price of the company's internal maintenance service typically includes only the purchase price of the lamp and part of the costs required to replace the lamp without the necessary cost factors. Instead, the external supplier's price includes the total costs of replacing the lamp. When comparing the competitiveness of a company's internal service, the comparison must always consider the total costs of the service being compared. When this is done, the costs of the company's own internal maintenance service turn out to be surprisingly high in the company's opinion. When the price of the company's internal maintenance service for replacing a lamp was calculated correctly in the above case, it was surprisingly 110 euros. I would like to emphasize that this is not always the case, but that the comparison must always be carried out correctly and on a case-by-case basis. The question I posed above must also be put the other way around. Is the service provided by an external service provider that your company uses competitive compared to if this service were actually produced as an internal service? In this case too, the comparison must always be carried out correctly and on a case-by-case basis. Has your company made comparisons based on the total prices of the services required for your company's business, either as internal services or as purchased services from outside the company? I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them. I hope that you were interested in this matter and that you can continue to be involved. I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

Achieving the company's financial goals must be based on PROFITABLE GROWTH, which requires that the company's financial management conditions are in order. When a company has the financial management conditions in order, this practically means that the company knows what results the company can achieve with its current investments and current products and services. In the following, I will examine the company's production function from the perspective of the financial management of a company. In my terminology, production occurs in all companies, not just companies that manufacture something. For example, in a shoe store, purchasing shoes for sale is production. In companies that manufacture products, production includes all procurement, subcontracting, manufacturing, logistics and maintenance of manufacturing machines. In companies that produce services, all procurement and subcontracting are production. Internally, the customer of production is sales, and the external customer is the customer who buys the company's products and services. The company's production objective is to deliver all products sold by the company's sales so that the efficiency and cost-effectiveness of production operations correspond to the objectives defined for the company's production in the budgeting. If, in exceptional cases, other objectives are defined for production operations and cost-effectiveness in order to obtain individual deals, these must be agreed with production during the offer phase before the deals are agreed. Production must also be able to implement these objectives agreed in exceptional cases. In order for the company to achieve its profit targets with the best possible results, this requires excellent cooperation between sales and production. This means understanding that crosses the boundaries of functions. In other words, production must train sales to understand what and under what conditions sales can make promises to customers on behalf of production. And on the other hand, sales must train production to understand how production must be able to develop its operations to enable it to obtain deals in the future. Did this interest you? I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them. I hope that you were interested in this matter and that you can continue to be involved. I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

The prerequisite for developing a company's profitability is that you know the STARTING SITUATION, i.e. how the company's realized profitability figures and the number of deliveries are distributed by product and service. Since profitability is definitely the most important key figure among the company's performance figures, in the following I will focus on examining the company's business change needs from the perspective of profitability. If you do not know the STARTING SITUATION of your company's change needs, the following problems will arise: 1. When you do not know how the company's realized profitability figures and the number of deliveries are distributed by product and service, you are not in a position to make strategic decisions about the direction in which the company's products and services and their offerings should be developed in the future, so that the company can achieve its strategic goals. 2. When you do not know how the company's realized profitability figures are distributed by product and service, then you do not know the actual cost of production by product and service, the cost structure, or the sub-costs of the cost structure. 3. When you do not know how the actual product-specific and service-specific profitability and delivery volumes differ from each other and you do not have concrete, data-based grounds for determining how much product-specific and service-specific profitability must be improved and delivery volumes increased in order for the company's need for change to achieve its profitability goals. 4. When you do not know how much their profitability needs to be developed and delivery volumes increased per product and service in order to achieve the profitability goals of the company's need for change, you are unable to determine how much their delivery volumes need to be increased per product and service in the company and how factors affecting profitability, such as price increases, cost reductions and operational efficiency increases, need to be implemented in the company so that the profitability goals of the company's need for change can be achieved. 5. When you lack the information I presented above, you do not have information-based bases to draw up action plans on how their delivery volumes need to be increased per product and service in the company and how to develop the company's products and services so that the profitability goals of the company's need for change can be achieved. 6. When you lack the information, I have presented above, in a possible adjustment situation of the company you will not be able to make sufficiently accurate action plans for the changes required by the need for adjustment, for example in the company's products and services, functions and operations. In practice, this means that you only have at your disposal the company's actual income statement, in which you divide the target figures for the company's need for change line by line and GUESS how they will change the company's operations. If the company operates in this way, then based on my experience, it is impossible for the company to plan the results of the adjustment in a sufficiently accurate and sustainable manner. Adjustments made in this way have almost always led to new adjustments, i.e. an adjustment cycle, which of course is not in anyone's interest. In the worst cases, the adjustment cycle has driven the company into bankruptcy. 7. In practice, all of the above means that you do not have the prerequisites for the company's financial management in place, i.e. YOUR MANAGEMENT IS ONLY BASED ON YOUR GUESSES. In addition, all of the above means that YOU DO NOT HAVE THE CONDITIONS TO LEAD YOUR COMPANY SYSTEMATICALLY AND TOWARDS CONCRETE GOALS AND YOU HAVE TO RELY ON INDEFINITE EXPLANATIONS OF WHY YOU CAN ACHIEVE THE DEFINED RESULTS GOALS WITH YOUR MANAGEMENT. In this case, the company is not managed, but the company's results are driven by coincidences. All of the problems I have described above can be avoided when you have a known STARTING SITUATION as the basis for planning the necessary results change in the company. It is too often said that the GROWTH of a company's business is the best solution to achieve the company's results goals. The fact is that only with PROFITABLE GROWTH CAN A COMPANY ACHIEVE ITS RESULTS GOALS and WITH UNPROFITABLE GROWTH, A COMPANY WILL BE FILED FOR BANKRUPTCY. I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them. I hope that you were interested in this matter and that you can continue to be involved. I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

Achieving a company's financial goals must be based on PROFITABLE GROWTH, which requires that the company's financial management conditions are in order. When a company has the financial management conditions in order, this practically means that the company knows what results the company can achieve with its current investments and current products and services. In the following, I will examine the company's sales function from the perspective of the company's financial management. Sales means an activity that results in selling the company's products and services in such a way that the company's sales goals are achieved. The goal of a company's sales is to achieve a turnover in accordance with the company's budget goals by selling the company's products and services at prices determined in connection with the company's budget goals. When asked about sales goals in companies, people always remember to say that the goal of sales is to achieve turnover growth. The latter part of the previous sentence about sales goals, "at prices determined in connection with the budget goals," is too often forgotten. Unfortunately, people often have the idea that all of a company's profit goals are achieved when the company's turnover is increased, increased, increased, etc. It is worth remembering that a company's profit only increases with the sale of each product and service when they can be sold at a price that covers all direct costs and the company's direct sales margin requirement. The company must have enough direct sales margin in euros from the sale of each product and service that the company can cover the product's and service's share of the company's indirect costs, fixed costs, deferred depreciation and financial expenses. What the company then has left from the sale of the product and service is profit before taxes. If the sale of a product or service cannot obtain a price at which the direct sales margin received by the company does not cover the product's or service's share of the above-mentioned costs and expenses, then the sale of the product or service is unprofitable for the company. In other words, selling any product or service at a price that is too low will lead to profitability and payment difficulties for the company. Are you interested in this topic? I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them. I hope that you were interested in this matter and that you can continue to be involved. I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

The performance targets defined in connection with each budgeting of the company include changes in the company's operations in such a way that their implementation is a prerequisite for the company's performance targets to be achieved. If, as a company manager, you do not know what all the activities in the company affect the company's actual performance figures. Then you do not know how changes in the company's performance targets affect the work in the company. Correspondingly, if, as a company supervisor, you do not know what all the activities in your area of ​​responsibility affect the actual performance figures in your area of ​​responsibility. Then you do not know how changes in the performance targets in your area of ​​responsibility affect the work in your area of ​​responsibility in the company. All of the above means that before you can start planning a change in performance in your area of ​​responsibility, you need to know the root causes of why the performance figures in your area of ​​responsibility are the way they are. For example, as a company manager, you need to know the answers to the following questions: 1. How profitable is the company's business as a whole? 2. How profitable is the company's business by product and service? 3. Why are both the company's results and the results by product and service the way they are? Only after this do you have the basis to define budget goals for your company and to draw up action plans for the changes required to achieve them. All of the above forms the basis for planning the necessary change in results in the company, i.e. you need to know the STARTING SITUATION. During my working career, I have too often met companies and their managers whose budgeting has been based on the following operating method. These companies have not known the STARTING SITUATION I described above. Budgeting in these companies has taken place in such a way that the company's actual income statement has been taken out first. Next to each number in it, a change figure has been guessed as the target, such that the sum of the change figures has resulted in the company's target result change figure. For the reasons I have explained above, it is no wonder that the management of the companies in these companies has been adrift and the results figures are in line with it. Such companies will never be able to achieve their profit targets with operational management and ignorance of the STARTING SITUATION of profit changes is a very common reason for company bankruptcies. The biggest risk in planning the profit change needed in a company is ignorance of the STARTING SITUATION. Is the STARTING SITUATION known when planning the profit changes needed in your company? I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them. I hope that you were interested in this matter and that you can continue to be involved. I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

In Finland, company accounting is a statutory requirement. The Finnish Accounting Act requires that all companies, regardless of their size or industry, maintain accurate and up-to-date accounting records. This applies to both sole proprietors and larger companies. The purpose of accounting is to ensure the transparency of a company's finances, assist with taxation and provide information about the company's financial situation. Section 1:10.3 (Chapter 1, Section 10, Paragraph 3) of the Accounting Decree sets out the minimum requirements for what must be presented in a company's income statement. However, accountants want to present companies' external accounting income statements in accordance with the income statement models set out in sections 1:1 -1:5 of the Accounting Decree, so that the work of accountants is as consistent as possible from one company to another. Although the accounting regulation allows companies to define the content of the income statement to serve the company's performance reporting needs, companies are typically not aware of this and do not know how to present their performance reporting needs to accountants. In other words, the gap of ignorance arises from the fact that accountants do not know enough about the business of their client companies and client companies do not know enough about the accounting opportunities of companies. The income statement of external accounting related to a company's accounting is not sufficient for the financial operational management of a company, because the income statement of external accounting only shows the consequences of the company's operations on a general level in the form of an income statement. The income statement of external accounting does not tell us what the root causes of the company's profitability problems are or what the root causes of the deviations of the company's actual performance figures from the budgeted target figures are. The gap in knowledge I mentioned above also results in the fact that accountants are not able to advise companies on how to build profitability monitoring into their companies, depending on the company's business, for example by product, service, project, customer and business function. On the other hand, companies are not even able to request advice from their accountants on how to implement these. Is there a need for development in your company in the areas I mentioned above? I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them. I hope that you were interested in this matter and that you can continue to be involved. I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at:  https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

Marketing refers to activities that companies use to either create the conditions for the sale of the company's products and services or, in some cases, companies also use marketing to sell their products, such as in online stores. When you ask companies what the significance of marketing is for a company, the typical answers are that the task of marketing is to increase the awareness of the company and its products and services, the value of the brand, etc. When you then ask companies what all this means in concrete numbers, the result is almost invariably confusion among the respondents and one respondent states: "Marketing and its results cannot be measured". My own opinion on the matter is based on the following. The goal in a company should always be that all work done in the company must produce results for the company and value or benefits for the company's customers. From the perspective of a company's profit-making, the customer of a company's marketing is the company's sales. The task of marketing is to identify and find potential key customers for sales, to increase their awareness and, in the best case, their interest in the company and its products and services. The results produced by a company's marketing must always be measured so that the company knows what and how all the company's investments in marketing have had and are having a concrete and measurable impact on the company's results. What and how do all the investments a company makes in marketing have a concrete and measurable impact on your company's results? I encourage you to share this blog post of mine on social media. If you have any suggestions for the topics of the next blog posts, I will gladly accept them. I hope that you were interested in this matter and that you can continue to be involved. I have written four books on creating the conditions for the company's financial management, and they are available in well-stocked bookstores and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

When the prerequisites for a company's financial management are in place and they are utilized in the right way, it means the following: 1. The results achieved by each of the company's resources (people and invested machines) are measured concretely with indicators. 2. The company's budgeted goals have been implemented for all the company's people and invested machines. All the company's people know their responsibility for achieving the company's goals, i.e. which goals they must achieve during the budget period so that the company can achieve its budget goals. 3. Each person in the company receives regular feedback on how well they have succeeded in achieving their personal goals. 4. If a person is unable to achieve their personal budget goals, they should receive the necessary advice and sparring from their superior to correct negative result deviations. If the person is still unable to achieve their budget goals, then their superior is responsible for planning and implementing the necessary solutions to correct the result deviations. 5. Every person in the company has the opportunity to influence the development of the company's performance and, as a result, influence their own earnings development and career in the company. 6. The amount of salary paid to each person in the company is based as much as possible on the results they have achieved. The extent to which the amount of salary paid to a person is based on the achieved personal results, the team's results and the company's results is based on the most concrete, measured and encouraging grounds possible. In order for all of the above to be realized, the company's superiors have the responsibility to create an atmosphere of cooperation within the company that is based on a positive attitude, aims for common goals, and encourages cooperation, so that the company's goals are continuously achieved and the company's performance continuously develops in accordance with the goals. Is there a need for development in the company in the matters described above? I encourage you to share this blog post of mine on social media. If you have any suggestions for topics for future blog posts, I would be happy to hear them. I hope you are interested in this topic and that you will continue to participate. I have written four books on creating the conditions for financial management in a company, and they are available from well-stocked bookshops and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen

A common misconception is that increasing a company's turnover always increases the company's profitability. This is not true. In order to generate a company's turnover, direct costs related to sales and indirect costs related to sales are needed. Unfortunately, these are often not separated from each other in a company's income statement. Why is it important to separate these costs, so the following is the answer to this question? Typically, companies monitor direct sales margin and think that it represents the company's sales margin. In this case, it is mistakenly thought that if direct sales margin is positive, then by increasing the company's sales, the company's profitability will increase. Indirect costs related to sales must also be included in the company's sales margin analysis, which are often very significant, even over 20% of the company's turnover. When indirect costs related to sales are also included in a company's sales margin analysis, sales margin can be negative. In such a situation, increasing sales will worsen the company's profitability and may lead to payment difficulties or even bankruptcy. Another important question related to the company's profitability is: When is the company's operational business profitable? As mentioned above, both direct and indirect costs related to sales must be included in the analysis of the company's sales margin. If after this, the company's sales margin is lower than the sum of the company's fixed costs, loan repayments and loan servicing costs during the period under review, then the company's operational result before taxes is at a loss. It is worth noting that this analysis includes the company's loan repayments and not depreciation. To summarize the above: A COMPANY SHOULD ALWAYS AIM FOR PROFITABLE GROWTH AND NOT GROWTH AT THE COST OF UNPROFITABILITY. Is your company's sales margin high enough? I encourage you to share this blog post of mine on social media. If you have any suggestions for topics for future blog posts, I would be happy to hear them. I hope you are interested in this topic and that you will continue to participate. I have written four books on creating the conditions for financial management in a company, and they are available from well-stocked bookshops and online bookstores in Finland, for example from BoD (Books On Demand) at: https://kirjakauppa.bod.fi/catalogsearch/result/?q=jarmo+manninen