Accounting: How Can A Company Recover From Less Than Predicted Quarterly Earnings?
Presenting an end-of-quarter earnings report can be a thankless task if all the lines are trending down. Having a few ideas on recovering from lower-than-expected quarterly earnings can help keep things in perspective when you’re facing a table of worried executives. A look at collection strategies, expenses, and your company’s most profitable customer base can provide invaluable data for a better next quarter.
One of the reasons an earnings report comes in below expectations is that actual cash received is not keeping pace with forecasts. A look at your collection processes may give you some idea where the bottleneck is occurring. Common issues include data drops, poor collection protocols, and incorrect billing. First, make sure that every product or service sold generates an invoice. You’ll also need to ensure that the company has appropriate billing procedures for customers who don’t make immediate payment. Your earnings report will suffer if you only send out bills once a quarter, because you’ll quickly accrue accounts that are 90–180 days or older. The longer it takes to bill for and collect payment, the less likely it is you’ll see the money.
If you’re receiving payment on everything, but business was simply slow for the quarter, then you might consider cutting expenses to help recover in the coming months. Although layoffs are a common way to shave costs, you don’t have to downsize your staff because of one lower-than-expected earnings report. For temporary solutions, consider cutting back on optional programs, reducing travel budgets, and freezing hiring. In most cases, you can shave funds off the budget simply by paying more attention to office supply orders. (To find out how others in the business are cutting expenses, check out the accounting community at Beyond.com.)
Another way to address poor quarterly earnings is to figure out how best to boost the earnings report for the current quarter. Campaigns to earn new customers can be expensive and don’t usually bring immediate results; concentrating on existing customers who are already profitable may be a better short-term solution. Analyzing accounting, sales, order, and marketing information can help you pinpoint your most profitable set of customers. Depending on your business model, this could be a certain demographic, an audience tied to a specific product, or a group of individuals requiring a certain service. Once you figure out where your biggest profits are, try to find a way to maximize those sales for the quarter. Offering your existing customers a discount, new products, or bundled services can be a great way to spur recovery.
Once the quarter is over, there’s nothing you can do about a poor earnings report. Instead of dwelling on mistakes or unfortunate events, come up with suggestions for future solutions. Cutting costs, increasing accounts receivables, and identifying low-hanging sales fruit are all ways to recover after a hard quarter.
About the Author
Nancy Anderson is the communities and article Editor for Beyond.com. Nancy has 10 years experience in the online job search business with Beyond. Nancy’s team produces dozens of articles every month for top internet sites. Follow Nancy and the Beyond team on https://twitter.com/BeyondJobs.