When it comes to increasing profits there are the usual and most common approaches, raise your prices and cut expenses.  Assuming that you are priced fairly, the first may initially provide an increase in profitability but the long term result may prove to be counterproductive, losing you customers over time.  If you are pricing your product or services too low then this is a viable and probably needed approach.  Cutting expenses is always much easier said than done.  Our expenses tend to grow with our business but they can still be reigned in practically and painlessly leading to an increase in your bottom line.  

Here are 5 practical and easy things that you can start doing right now to see big results in your profitability:

  1. Timely billing- Do you sent out your invoices daily or even weekly?  It is absolutely shocking how many companies, especially sole proprietors, send out their invoices weeks or even months after services are rendered.  This is your cash, your capital, your operating income!  Typically, when a customer uses your service, they have an immediate need or desire that they are ready to pay for.  They may not be so ready 6 months later.  How many invoices don't get paid or are negotiated because too much time has gone by?  I have seen this happen all too often in all types of services from plumbers to attorneys.  Get those bills sent out right away!
  2. Receipts- Do you have piles of receipts (or a big box of them) that you hand to your accountant at tax time leading to a bill that just put you out of a vacation this year?  Even worse, have you lost piles of receipts leading to business expenses that can not get taken?  Credit card statements are not acceptable as proof of expenses if you should get audited. Waiting until the end of the year to get insight into your profitability and tax situation is definitely too late.  You have killed your opportunity to do anything about it.  Did you know that with quality cloud based bookkeeping programs, such as Quickbooks Online and Xero Accounting Software, you can snap a picture of a receipt at the time of purchase and upload it to your account immediately?  Voila, no more lost paper receipts.  You or your bookkeeper can code and expense that receipt and you can now see your expenses and get a real time picture of where your profits are.  
  3. Mileage- Are you tracking all business related mileage?  While you can not expense mileage to and from work, you can expense all related  travel.  This includes driving to estimates and consultations, picking up office supplies and going to business related meetings and networking events.  The same programs mentioned above have mileage tracking apps that make it quick and easy to expense your mileage in real time meaning no more missed expenses.
  4. Open a profit account- What?  How can I do this if I don't know what my profit will be you ask?  Open a separate account specifically dedicated to profit.  Start small depositing 1 or 2% of all revenue collected.   You don't miss what you don't see (think of employees making automatic 401k deductions).  If you can manage your business with $10,000 then you can manage it with $9,800.  If you do this a few things will happen.  First, you have the instant gratification of seeing profit grow.  Next, you will naturally start looking at your expenses and make some small changes enabling you to increase the percentage that you're taking off the top.  Imagine growing your profit to 5, 10 or even 20% right upfront, on top of your salary!  I advise my clients to read the book "Profit First" by Mike Michalowicz for an in depth look at how this works.
  5. Leverage your time and work flow- You are good at what you do, probably even great at it.  Most business owners start a business in an area that they really enjoy or have a natural talent or knack for which is why you make money doing it.  What things are you doing that are taking time away from you growing your business?  Are you spending substantial blocks of time doing tasks that could be ultimately costing you money?  Could someone else do them for you?  So many entrepreneurs run themselves ragged mistakenly assuming they have to do it all and spend way too much time and effort doing tasks that ultimately cost them in time, money, energy and focus.  Many of these things can usually be done by a part time office person or by outsourcing.  An answering service can be a cost effective way to field and manage phone calls.  A part time office assistant or virtual assistant can draft correspondence.  Bookkeeping is probably the most time consuming task required by every business and is usually not an area that business owners are particularly good at or enjoy.  Investing in a quality bookkeeper or service can ultimately save you many thousands of dollars in lost income, taxes, accounting fees and time.  This has been documented recently in magazines like Inc. and Entrepreneur as one of the best investments you can make in your business.  Choose quality, not "big box" call center type companies that will draw you with low initial prices but tend to turn over staff (leaving questionable service and attention) and raise prices after six months or a year.

There are many other ways to increase cash flow and profitability including tax analysis and planning, budgeting and benchmarking.  For more information, please contact us and see what Make Your Mark Bookkeeping Solutions Ltd can do for you.