Why You Should Review Your Financial Statements For Unprofitable Products

Association of Business Training
November 15, 2012 — 829 views  

Why you should review your financial statements for unprofitable products

Although no business can save its way into profitability, it can certainly invest itself into bankruptcy. Worse than failing to extract every penny of profitability from good ideas is trying to ignore the bad ones that are dragging down the bottom line. One of the most important distinctions between successful businesses and stagnant businesses is that successful businesses are always reducing their waste by reviewing the financial statements for unprofitable products.

It can be quite easy to simply ignore the unprofitable portions of your business. It can be psychologically unprofitable for an employee to think about, as everyone would rather focus on the things that are going well. Also, people may feel that if they bring up a negatively performing product, they will somehow be associated with it and reap some of the "rewards" of non-performance.

As a business leader, it is your job to first allay these fears in your employees. No one should be afraid to tell you what is going wrong for fear of being somehow blamed for the occurrence. As a matter of fact, you should look favorably upon anyone who has the guts to take his or her eye off of the glory for long enough to worry about the profitability of your company for you.

Aside from all of this, unprofitable products are most likely unsatisfying products as well. If you are delivering unsatisfying products to your customers, you are giving them every reason to distrust you and your other lines for being just as low quality. You are also giving them free rein to tell everyone in their social circle about your failures. After all, if you are not going to cut them out of the marketplace, then it is up to to market to police itself.

Finally, the most important reason that you need to review your financial statements at least once a quarter to cut back on unprofitable products: You make less money. It costs much more to sell a bad product to the public than it does a good one. In terms of man hours and financial resources, you are most likely spending more to keep a bad product on the market than you are in keeping your good ones there. Do yourself a favor and take the pressure off by identifying the products that are not worth the resources that you are putting into them. Peruse those records today.

 

Association of Business Training