Factors affecting the amount of profit. External and internal factors

Every entrepreneur knows what profit is and how to calculate it, because this is the main goal (or one of them) of any economic activity. However, when calculating the long-awaited currency, you can find that the actual amount differs significantly from the expected amount. The reason is often various factors that affect the amount of profit. Their list, classification and degree of influence will be described below.

Briefly about the concept of "profit"

This term refers to the difference that is calculated by subtracting from the total revenue (revenue gained from the sale of goods or services, fines and compensations, interest and other revenues) costs incurred in order to purchase, store, transport and market the product of the company. What is profit, the following formula can more illustratively illustrate:

Profit = Income - Costs (expenses).

All indicators before the calculations should be translated into a monetary equivalent. There are several types of profit: accounting and economic, gross and net. There are several views on what profit is. The definition of its various types (accounting and economic, gross and net) is necessary for the analysis of the economic situation in the company. These concepts are different from each other, but their significance in any case is the most vivid characteristic of the efficiency of the enterprise.

Indicators characterizing the profit

Knowing what profit is (definition and formula are presented above), we can conclude that the obtained indicator will be absolute. At the same time, there is profitability - a relative expression of how intensively the enterprise works and what its level of profitability is relative to a certain base. The company is considered to be profitable when the amount of the received income (revenue from the sale of goods or services) not only covers the costs of production and sale, but generates profit. This ratio is calculated as the ratio of net profit to the value of production assets:

Profitability (total) = Net profit / (Amount of fixed assets + Amount of material current assets) x 100%.

Other indicators of profit (profitability of products, personnel, sales, own assets) are calculated in a similar way. For example, the profitability index of products is found by dividing the profit by the sum of the total cost of the product:

Profitability (output) = Net profit / Cost of production and sale of the product (cost price) x 100%.

Most often this indicator is used to conduct analytical calculations of intraeconomic importance. This is necessary in order to control the profitability or unprofitability of specific products, to introduce the manufacture of new types of goods or to stop the production of unprofitable products.

Factors affecting the amount of profit

An inseparable part of the activity of any successful organization or enterprise becomes a strict accounting of incurred costs and incomes received. Based on these data, economists and accountants calculate a mass of indicators to reflect the dynamics of development or degradation of the company. In doing so, they study the factors affecting the magnitude of profits, their structure and intensity of impact.

Analyzing the data, experts evaluate the past activities of the company and the state of affairs in the current period. The formation of profit is influenced by many interrelated factors, which can manifest themselves in completely different ways. Some of them contribute to the growth of income, the action of others can be described as negative. In addition, the negative impact of one of the categories can significantly reduce (or even cross out) the positive result obtained due to other factors.

Classification of the factors determining profit

Among economists, there are several theories about how to separate factors that affect the amount of profit, but most often resort to this classification:

1. External.
2. Internal:

• Non-productive,
• Production.

In addition, all factors can also be extensive or intense. The first illustrate the extent to which production resources are used for a long time (whether the number of employees and the value of fixed assets are changing, whether the working shift has changed). They also reflect the irrational use of materials, supplies and resources. An example is the production of defective products or the production of a large amount of waste.

The second - intensive - factors reflect how intensively the resources available to the enterprise are used. This category includes the use of a new progressive technology, more effective disposal of equipment, the involvement of personnel with the highest level of skills (or activities aimed at improving the professionalism of their own employees).

What concerns production and non-production factors

Factors characterizing the composition, structure and application of the main components of production, which take part in the process of profit formation, are called production. This category includes funds and objects of labor, as well as the labor process itself.

Non-productive should be considered those factors that do not have a direct impact on the manufacture of the company's product. This is the order of supply of commodity-material values, how products are sold, financial and economic work is carried out at the enterprise. The characteristics of the working and living conditions in which the employees of the organization are located also apply to non-production factors, since they indirectly affect the profit. However, despite this, their influence is significant.

External factors: list, nature and extent of influence on profit

The peculiarity of numerous external factors that can affect the profitability of an enterprise is that they do not depend on managers and personnel in any way. Among them there are:

• The demographic situation in the state.
• Availability and level of inflation.
• Market conjuncture.
• Political stability.
• The economic situation.
• Interest rates for credit.
• Dynamics of effective consumer demand.
• The price of imported components (parts, materials, components).
• Features of tax and credit policy in the state.

All these external factors (one or several at the same time) inevitably affect the cost of production, the volume of its output or the number of products sold.

Specificity of internal factors on which profit depends

An increase in the organization's profits can occur with an increase in cash receipts or as a result of a reduction in expenses.

Internal factors reflect the production process itself and sales organization. The most significant impact on the profit received by the enterprise, increase or decrease in the volume of production and sale of goods. The more these indicators are, the higher the income and profit the organization will receive.

The next internal factors are the change in the cost and price of the product. The greater the difference between these indicators, the higher the profit can be obtained by the company.

Among other things, the profitability of production is affected by the structure of manufactured and sold products. The organization is interested in producing as much as possible profitable products and reduce the share of unprofitable (or completely eliminate it).

Ways to reduce company costs

To reduce costs and increase profits, entrepreneurs can apply several methods. First of all, experts review and analyze ways to reduce the cost of production, the process of transportation or sale.

Next, consider the issue of personnel maintenance. If possible, cut various free privileges, bonuses, bonuses and incentive payments. However, the employer can not reduce the rate or salary of employees. Also, at the same level, all compulsory social payments (on sick leave, travel, holiday, maternity leave, etc.) remain.

In extreme cases, the head is forced to resort to the dismissal of freelance and temporary staff, the revision of the staffing table and the reduction of staff. However, he should carefully calculate such steps, because the dismissal of workers will not lead to increased profits, if the volume of production and sale of the product will decrease.

What is the optimization of tax payments

The company can save by reducing the tax amounts that will be transferred to the budget. Of course, we are not talking about evasion and violation of the law. There are legitimate opportunities and loopholes, which, if properly used, can lead to increased profits.

Minimization of taxes does not mean a literal reduction in tax payments, but rather an increase in the financial resources of the enterprise, which results in the entry into force of special taxation systems with various preferential terms.

A completely legal and legitimate way of conducting tax accounting, designed to increase profit margins and reduce taxes paid, is called tax planning.

Due to its efficiency, today, minimization of taxes is becoming an almost mandatory procedure for many enterprises. Against this background, the conduct of economic activity on general terms, without the use of available tax benefits, can be called short-sighted and even wasteful.

Intangible factors

Despite the fact that some factors that affect the amount of profit the company, sometimes can not be controlled, the determining role in achieving high incomes belongs to the properly organized organizational system in the enterprise. The stage of the company's life cycle, as well as the competence and professionalism of the management personnel, largely determine how significant the influence of certain factors will be.

In practice, a quantitative assessment of the impact of a particular factor on profitability is impossible. Such a difficult factor for measuring is, for example, the business reputation of the company. In fact, this is an impression of the company, the way it looks in the eyes of its employees, customers and competitors. Business reputation is formed taking into account many aspects: creditworthiness, potential opportunities, product quality, service level.

Thus, it is possible to see how wide the range of factors affecting the profit indicators of an enterprise. However, applying methods of economic analysis and a specialist oriented in the current legislation, various ways of reducing costs and increasing the company's revenues are available.