10 Ways to Increase Your Profits

Sometimes turning over a profit can seem just out of reach for a small business. There are many ways to boost profits and these can easily be broken down into two simple methods:

1. Increase your profit margin by lifting sale prices, reducing costs, or both.
2. Increase the volume of sales you are making.

They sound simple, but how do you go about doing this? Here are some practical examples:

Increasing your profit margin:

1. Most importantly you need keep accurate records so you can monitor the profit margin on individual products and services and keep tabs on the various factors that affect them. You could consider eliminating products or services with a low profit margin and increase your focus on the better performing goods. This should be done with caution; you should question whether these lower performing products are one of the main attractions for customers, in which case you should hold on to them.
2. Take up discounts whenever you can, stock up when your suppliers are running promotions and take up prompt payment discounts where possible. Keep a close eye on your costs, challenge any price rises with suppliers and shop around for cheaper rates.
3. Increase your prices.  Monitor the cost of producing your products and the prices your competitors are charging and increase your own prices in with these in mind. You may lose the odd customer but the increased income generated from your less price-sensitive customers will make up for this.
4. Look for easy ways to add value to your product. The value to your customer will be the benefit they receive from the product after the costs of obtaining it. This cost includes the monetary value as well as the time, effort and emotion invested in the purchase. By eliminating any difficulties associated with the purchase, such as delays, long phone calls or faulty products you can increase the value without actually giving anything away.
5. Improve your efficiency to reduce costs. Does the business run as smoothly as it can or could you streamline your back office procedures further? It may be worth outsourcing administrative tasks to benefit from the knowledge of someone who specialises in this area. Embrace time saving technology, a good example of this is cloud accounting software. Xero in particular offers a number of add ons such as the facility to upload your bank transactions direct from your online bank statement.

Increasing your sales volume:

1. Try offering a series of products or services wherever possible, such a six session training course or a set of products which interact with one another. This allows time for a relationship to build up with the customer and will often generate additional sales.
2. Offer your customers incentives to make repeat purchases, for example a loyalty scheme or a discount when they introduce a friend who makes a purchase.
3. Try cross-selling, for example if you run a shop selling cameras you could consider running a photography course to generate additional income and increase customer loyalty.
4. Make your business as visible as possible using your website, blogs and social media. Try and establish new connections and link up with complementary businesses in order to share marketing tools. Measure all your marketing efforts by using special offer codes to see which ones are the most cost effective.
5. Train up everyone involved in the business as a salesperson, share your goals with them and reward them when they go above and beyond to promote the company or suggest a brilliant cost saving idea. 

If you need help monitoring your costs or want clearer information from your accounts so you can feel confident about making price increase then please get in touch to find out how I can help. 

How to Maximise Your Cash Flow

Cash flows problems are one of the main reasons businesses are forced to cease trading. By developing some basic cash management procedures you can make sure your business doesn't fall at the first hurdle. The guidelines below will make sure you are the one controlling your cash and it’s not your cash controlling you!

Why is keeping track of your cash flow so vital?

• A cash flow statement is a great indicator of whether a business has the resources for growth, an invaluable tool to persuade potential investors you are a safe bet.
• A strong cash flow position will minimise the cost of borrowing and eliminates late payment fees and penalties.
• You can pay suppliers early or on time, securing prompt payment discounts and building strong relationships which may reward you further down the line.
• A cash flow forecast is a great tool for start ups where you can’t use your trading history to secure a loan or credit account with suppliers.
• It will free you from the stress and pressure of uncertainty and allow you to focus your energy on building your business.
• A strong cash position is essential to become a market leader, you will need to know if you have the resources to invest in the latest market trends and act quickly to secure them.
• You will be able to invest in higher skilled staff and better quality raw materials resulting in a better end product. These will be more expensive but should also generate higher inflows of cash from increased sales, reinforcing your cash position.
• It will give you the freedom to take a step back from the business, take a holiday and relax, knowing your business will survive without you so you can come back refreshed and more energised than before.
• You can make financial decisions with confidence and be sure the sale prices you set are sufficient to support continued business activity. 

How to maximise your cash flow position:

1) Keep an up to date and accurate record of your cash flow so you know exactly what you have to spend at any given moment.

2) Set up a cash flow forecast with your regular payments as far in advance as you can, add in any one off costs you think you may encounter so you can identify problem areas well in advance of them happening. Forecast your sales, being cautious rather than optimistic about growth and the state of the economy.

3) Keep on top of your debtors – send out invoices as soon as the work is done, follow up to make sure the invoices are received and chase up late payers as soon as their invoices become overdue. You might want to consider invoice discounting – where a third party buys your debtors for a discounted price. It can be expensive though so should be considered carefully.

4) Run credit checks on new customers – you don’t need to pay for this service. Sometimes a simple internet search will tell you what you need to know. Always set firm credit limits and make sure these are mentioned on your invoices. If you are uncertain about a new customer ask them to pay in advance or take a deposit. If you need to increase cash quickly offering a small discount on prompt payment may help.

5) Avoid investing in a lot of stock. Make sure your order process is quick and simple so when you need new stock you can get it fast. Put any old stock on sale, it will only decrease in value so better to turn it into cash as soon as you can.

6) If you do identify a possible cash crisis plan ahead and find out what funding options you have. It might be worth speaking to your bank to find out if you would qualify for a loan so you know you can fall back on it if you have to.

7) Look at your suppliers’ payment terms. Are you making the most of them? You may want to approach long standing suppliers to ask if they can offer more flexible terms.  

8) If you are VAT registered check if you qualify for the cash accounting scheme. If you usually make a VAT payment, rather than receive a reclaim, this will be a great help to your cash flow as you calculate the VAT based on the dates of your receipts and payments, rather than the dates of your sales and purchase invoices.

9) Invest in the right accounting software – some of the cloud accounting packages now offer great credit control facilities where you can email your invoices out automatically and receive a notification when the invoices is viewed so no more lost in the post excuses!

10) Shop around for new suppliers – spend a little time making sure you are getting the best prices and make sure you review annual contracts for supplies like insurance or electricity to get the best deals. Always check your invoices and make sure you know what you’re being charged. Often querying costs and letting suppliers know that you are cost conscious will prompt them to offer you better deals in order to retain your custom.

11) Monitor your profit margins so you can anticipate when profit is likely to fall. Have a plan to counter this, by increasing prices or running special promotions, for example.

12) Try to develop the right client base - a strong core of regular work where clients are on a retainer will make your cash flow more predictable.

13) If you are facing a cash crisis look for alternative ways to generate funds, for example, do you have any assets or a desk space you could rent out? 

All these processes do take time and if you just need help getting started or would like someone else to manage your cash for you then please get in touch to find out how I can help. 

Call me on 07595 458 221 or drop me an email at tracey@geavesbookkeeping.co.uk.