How can the economic profit of an enterprise be increased?

As you know, the economic profit in its pure form is the difference that is formed between the so-called balance profit and the group of compulsory payments, including taxes on the financial results obtained and, accordingly, on profit. It is worth noting that the taxes paid for financial results include the following: property tax belonging to the enterprise, for the maintenance of social and cultural and housing funds, for the needs and maintenance of police and education, and others. This is quite a serious tax burden. At the same time, it is necessary to take into account that in accordance with Russian laws, the profit tax is calculated on the basis of the balance sheet profit, which is naturally much higher than the real profit that fully reflects the economic and financial activity of an enterprise. As a consequence, there are cases when, as a part of the amount of payment for taxes, not only economic profit becomes, but also partly circulating assets. Thus, the proceeds from the sale of products may not always fully ensure a sufficient profit.

Functions performed by profit

Profit, being one of the most important categories existing in market relations, naturally performs a number of functions. First of all, it should be noted that profit primarily characterizes the effectiveness of the activity. It is clear that the very existence of such a fact as economic profit proves that the enterprise is profitable, and the proceeds from the sale of products are sufficient for the development of production.

Secondly, do not forget about the so-called incentive function of profit. It is precisely in the presence of the latter that it is possible to carry out various kinds of social programs, the development of production, the increase in capital directly, and so on.

The third position in this list is the function of profit as an indicator of the effectiveness of a variety of investment projects, for example, the introduction of new technological processes, equipment, while the definition of revenue will depend on the efficiency of production. Can be evaluated in this way the effectiveness of various kinds of marketing technologies.

Reduce costs as a way to increase profits

For any manufacturer of one of the primary tasks is to reduce the cost, which will naturally increase profits. Carrying out such an operation as determining revenue. It is not necessary unconditionally and, most importantly, to completely evaluate the figures obtained, it is important to take into account such an indicator as the cost of production. In practice, the classical options for reducing the cost are, of course, saving fuel and raw materials, labor costs through the modernization of production, reducing commercial and administrative costs, and so on. It should be remembered that the reduction in the cost of production should be justified and take into account the fact that at a certain level, there is already a decline in quality, while economic profit will also decrease, and in geometric progression.

At the present stage of development, so-called innovative methods of reducing costs, for example, management accounting, have become widespread. It allows you to perform effective control over the costs, overall costs of the enterprise. As a kind of accounting, distributed over the centers of responsibility, when a part of management functions is assigned to linear management structures, which in turn bear full or partial responsibility for actual expenditure indicators within the limits of planned values and indicators, can be applied.