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Here at Blue Onion, we look at the fundamentals of a business in order to see where they might be able to improve. Is a company growing efficiently and are they taking all factors into consideration of their actual business? Are they focusing on margins?
Right now, one of the key issues facing businesses is inflation. Consumers have less money in their pockets and are less likely to spend the money they do have. As inflation increases, the cost of products increase, which is going to chew into your margins.
So, as consumers start tightening their belts and asking “do I really need this product?” companies must go back to basics, back to products and actual margins, and get an understanding of what makes sense.
For example, many brands have too many products. They feel like they need to have every single possible flavor or every single possible color of one specific item. But this isn’t necessarily practical. Have you done an analysis of which products really move the needle? Which of your products is actually generating 80% of your sales? The key here is understanding what products your consumers actually want and focus your efforts on what is actually making you money.
At the same time, you also need to know what you can do to alleviate some of your costs. It starts with putting yourself in your customers’ shoes. Do you truly know what they want? Get creative with promotions that will actually relate to your consumers.
We always suggest to our customers that they should go into their profit and loss statements and start from the top. This should give them some ideas on how to generate more top line sales. However, focusing exclusively on top line sales is a mistake. Make sure that whatever you're doing for the top line is going to bring in a healthier bottom line.
Look to your employees, as well. Can they do multiple jobs? Can you assist them in any way to be more productive? Flexibility right now is key, and that comes from your people. The fewer people you need to run your business, the more you save.
Businesses also really need to get an understanding of what their true return on ad spend is. Make sure you truly calculate the cost of generating your gross revenue. Do you know your true selling cost? Think about all the fulfillment costs, all of the selling costs, any of the discounts that went into it, any free product that you had to give away. You might be shocked. So, take a look at what that true row as number is, and from there you can really understand what you need to weed out.
Here at Blue Onion, we believe in empowering finance and accounting teams so that they can work on impactful strategic initiatives. Founded by Accounting, Finance & Data Science Leaders, we’ll modernize your order-to-cash reconciliation. Contact us today.