Proactive business
Successful businesses don’t happen by accident. Growing profits is not happenstance, but the result of company owners with their fingers on the pulse of their businesses.
If you’re a small business owner the accounting administration is often a necessary evil – but one that is easily pushed onto the back burner when you’re busy working with your clients.
Your accountant will process your information to produce your end of year figures, VAT returns, MTD submissions etc., but, by the time you get those figures, you’re looking at ancient history.
Know what you’re making
Ideally, you should be looking at your gross profit at least monthly, if not weekly. Know the cost of sale for everything you sell – materials and time costs.
When you have that clear, it can affect your pricing, your materials resourcing, the man (or woman) power you have available. You can grow your profits without selling any more than you do now, with just a few tweaks.
Be proactive with invoicing
One of the biggest challenges we see with small businesses is that they don’t keep track of when their customers are paying the invoices. If they pay, but push their credit to (or past) the limit, they’re putting a strain on your cashflow.
Most accounting software allows you to see how fast individual customers pay. It also lets you set up automated invoice for repeat customers – if they purchase the same goods or services every month, the invoices can be self-generated.
Also, if they run past their credit terms, the software can be set up to send a reminder automatically.
Depending on the software you use (Xero, Sage, QuickBooks, etc.) you may even be able to set up an automated reminder a couple of days before the final due date.
These are all set up once and then they just support your credit control in the background without you having to do anything. Your cashflow will improve and no more balancing on the edge of the overdraft.
Know where the money is coming from
If you have a number of income streams, it’s worth drilling down into each stream to see where the money is coming from, and going to. It’s not just what people are paying you, but what it’s actually costing for that specific project or income stream.
While most businesses have variable levels of profit on different items or services, it’s worth being clear on where the profit is mostly being generated. Is there something that is costing you more than it’s making and could be discontinued, or are you happy to continue using it as a loss leader to bring in bigger contracts?
Don’t guess… KNOW! If you look at your numbers monthly – you can take action before small problems turn into big ones.
