By Linda Montfort
As companies put the finishing touches on closing the 2013 financial records and prepare tax returns, it is a good time to analyze the results. Sales increased – great!! Profits decreased – HOW? What performance indicators does your company use to measure success?
Many companies use sales as a sign of success, but sales alone does not provide the entire story. Net profit, or better yet, net profit margin, provides a better indicator of the success of a company. Net profit margin is a key indicator of how well a company is run in terms of efficiency and cost control. It is a calculation of how much profit is generated by each dollar in sales.
Do you know how your profit margin and net profit margin compare to your peers? Return on assets (ROA) is also a good statistic to benchmark. An ROA that is below the industry average can indicate an inefficient use of business assets.
Benchmarking can help your company zero in on the factors that may be affecting your bottom line. How does your company’s direct material and direct labor costs and average collection period compare to a high-profit manufacturing company? Are other companies controlling their costs better? Are these companies attracting your skilled workforce?
AMT provides several benchmarking surveys to help you find these answers. The Financial Performance Report, Operating Metrics, and three Compensation & Benefits Benchmarking Surveys can help you compare your company to others in the manufacturing technology industry. Understanding your company’s financial results as well as paying a competitive salary could be your recipe for success.
ONLY AMT members can take advantage of this free program. Visit www.amtonline.org/BusinessServices/benchmarking to get started This opportunity only comes once each year, so don’t miss your chance!
Linda Montfort is the Vice President of Finance & Human Resources at AMT- The Association For Manufacturing Technology.
Categories: Executive Corner