In 2009, Japanese airline Air Nippon realized it was time to deal with a big problem; passengers were quite literally flushing profits down the drain.
One of the big expenditures of airlines is fuel. The heavier the plane, the more fuel it burns. That’s why airlines are always experimenting with new ways to shave a few pounds off the weight of their airplanes, like putting in lighter seats or printing in-flight magazines on thinner paper stock.
Passenger weight also affects fuel use, and Air Nippon realized that passengers who use the restroom before getting on a plane weigh a few ounces less than those who don’t. They decided to see what would happen if they encouraged customers to go before boarding. The airline marketed this as an environmental measure rather than a cost-cutting one, reporting that if 50% of passengers would go to the restroom before getting on the plane it would reduce carbon dioxide emissions by 4.2 tons a month. It was a win-win for the environment and Air Nippon.
Know Your Numbers and Save Money
Without financial insight into their business, airlines wouldn’t know how much customer weight affects their bottom line. Without solid financial data you can lose a lot of money through hidden profit leaks.
Here’s a real-life example. A client of ours categorized their financial statement revenue by method of payment, which is an unusual way to track profits. How many income statements have you seen that detail revenue by check, paypal, wire transfers, and credit cards? It’s a system that’s almost designed to limit financial clarity.
We decided to change to a system focused on profit centers, which are business units or segments that generate revenues and incur costs. And, it turns out that this company had added on services that were not their core competency onto their core business. When we could measure the profitability of each profit center, we learned that an add-on service that wasn’t part of the company’s core business was losing them over $100,000 per year. Imagine flushing a hundred grand down the drain every single year! When we saw what was happening, we created a strategic alliance with another business that could handle the money-losing work.
To Know Your Numbers, Focus Your Data
In the words of Hewlett-Packard’s co-founder Bill Hewlett, “you can’t manage what you can’t measure.” Our mission at Dashboard is to help you gain clarity about your financial data and uncover the profit leaks in your business.
On a side note, when you travel again, remember to go to the restroom before getting on a plane, even if you don’t think you have to “go.” It’s the only time that any leak could be helpful to someone’s business!
Worried you may be flushing profits down the drain?
Carol Soman CPA
CHIEF EXECUTIVE OFFICER