We prepare management accounts for many small businesses and take the time to review them with the business owners for various reasons but many times we discuss how profits could be increased and ultimately increase their dividend. Here are some common ways we open our discussions with which help improve profits or small businesses:
1 Increase Sales Price
We live in a very competitive world, but a detailed review of sales can sometimes unveil revenue streams where pricing perhaps hasn’t been increased in a while or where customers may be receptive to price increases. This ultimately drops straight into the business bottom line profit because there are no additional costs to increasing prices.
2 Review Profit Margins
Good margin management is key to pricing jobs and ensuring job are delivered in the most profitable ways. You could start by reviewing your most recent jobs or projects and the direct incidental costs. You may be able to reduce the costs for example, by obtaining bulk discounts, agreeing more favourable fixed prices or centralising your suppliers. Reducing costs directly improves your businesses profitability and distributable profits.
3 Control Overheads
As small businesses grow it is common for overheads to start to increase. Sometimes the Directors simply don’t have time to sign off every expense that the business incurs or overheads increase steadily without the business owner realising. We recommend periodically reviewing business overheads to control overhead expenditure and nip any overspending in the bud.
4 Prepare a Business Plan
A business plan includes a financial plan which sets out where you expect your sales to come from and your expected costs. Having a yard stick by which to measure your actual performance gives something for you to work towards and targets to meet. It can be motivational and keeps a business on track all contributing to healthier profits.
5 Monitor Your Financials
Staying on top of your financial position means you will know how much money you have in the bank, how your staff are performing and how much you are spending. You’ll be able to avoid overspending, ensure your team are performing to their very best and avoid bad debts or late payment charges. Not only does this mean better cash management but also maximum profitability for your small business.
If you are searching for a bookkeeper to help you get organised then consider getting in touch with Bookkeeping Angels. We offer bookkeeping, VAT and management accounts services for a flat rate fee of £20 per hour.