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What is stopping you improving your profits?

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There are many things you can do to increase profits in your company, although this doesn’t always involve big changes. There may be reasons why your profits have stalled, and not all the reasons will be obvious. It is worth investing the time and resource to look at your business and see where you can make positive changes. The two simplest, top-level ways to improve profit are to increase sales and cut expenditure.

Review costs

Reviewing your costs regularly could reveal hidden extras that you pay for, like more expensive raw materials or machinery and equipment not being used. The cost of production has an impact on profit margins, and paying more than you need to will negatively impact on profit. Consider your suppliers and see if you can get a better deal, and look elsewhere. Compare costs of overheads on a regular basis, producing reports which will indicate higher costs and reduced profit margins requiring urgent action. Even this is something the right accountant can get involved in.

Management

Consider whether you have sufficient management resources to monitor key performance indicators. Monitor the actual figures against the forecasts to see how the company is performing. If performance is not getting to where you thought it should, try to find out why. A management accountant will provide a thorough review service for your company, producing forecasts, reports and actual data to improve profits. Personnel should also be monitored to make sure they are performing in the most cost effective manner. Monitor employees to make sure tasks are performed at the most appropriate level, rather than paying senior staff a higher salary to perform routine tasks below their pay grade. Use Service Level Agreements (SLAs) and Key Performance Indicators (KPIs) to check and monitor results.

Review profit margins

Not carrying out a regular review of your profit margins could mean you are spending more than necessary on producing a particular product or providing a service. Reduce expenses where possible and take measures to increase sales – look at cross-selling, up-selling, and new business. Even when turnover and sales increase, it doesn’t automatically mean that profits have also increased. If your costs have risen, profit margins will fall. In fact, increasing sales could result in lower profit. Not increasing prices at the right time may also cause profits to dip. Although most business owners are worried about increasing prices, you may need to make some changes to cover extra costs.

There are many aspects of a business which can cause profits to dip or stall and often without the owner immediately noticing. If you would like to discuss how to increase your profits with us, please call for an informal chat.