How do you make the best of your business? Are you as financially healthy as you could be? What can you do today that will help increase your profitability?
Some solutions are simple; others require more effort and skill.
But putting basic strategies in place will help you identify problem areas and remove the obstacles to greater profitability.
Take Advantage of Professional Help
To increase profitability, you will often benefit from professional help. One of the best people to help identify ways in which you can increase your business profitability is your accountant.
Accountants gain insight into your business by carrying out accounting work and looking at your financial data. They may be the best people to give advice linked precisely to how your business is working and what can be improved in the future.
For example, with professional bookkeeping services you can see how a simple profit and loss statement reveals incidences of profit potential that are so far being unrealised, reveal the obstacles in place that are preventing the realisation of the profits, and what can be done to remove the blocks. Close examination of data might reveal issues like low sales, too much interest, high carrying costs, and low gross margin.
Fix Low Gross Margin
Looking at the gross margin for every product and service helps see how this product or service is developing over time and whether there is a problem. Identifying the problem can bring about an uptick in profitability.
For example, are you offering the right mix of products and services? Do you have efficient operational procedures in place? How is your pricing? Can you get a better deal from suppliers? Do you have too little stock or too much?
Deal With Low Sales
Low sales will impact profitability. You need to look at the factors behind low sales for the reasons to become clear – only then can you fix the problems and move on. You need to look at your pricing, your sales and marketing tactics (for example, cross-selling and the performance of sales staff), stock levels that make meeting orders a problem, customer service, operating procedures, debtors, and debts.
Stop Paying Excessive Interest and Carrying Costs
Interest payments can be a problem for many businesses. It can help to renegotiate your financing which will bring in more money and result in increased profitability. Also, you may have excessive carrying costs because you have too much stock, or you have too many debtors.
An inefficient stock system could be harming your profitability, and excessive debtors may be due to a failure to effectively pursue non-payers or an over-generous policy of credit. These factors can be rectified.
Your profit and loss statement reveals a great deal. Once the factors impeding profitability have been identified, the hard work starts for developing procedures to release the potential within your company. It may be a difficult, but hugely valuable job; one best done with the help of your accountant!