If you are not a non-profit organization then you are in business to make money. You want to increase your bottom line which means keeping more of the money you make. You want to maximize your business tax deductions, so you are legally paying the minimal in federal taxes. There are at least three areas that every business owner must get a handle on with the help of an accountant in order to increase profits.
Profit Margin Analysis
The gross profit margin is one of the most important indicators of a company’s health. It shows whether or not the business is generating enough sales to cover the cost of generating those sales. A low gross margin percentage means you need to increase your sales and lower your costs. The gross profit margin tells you how much money is available for expansion and increasing sales.
It is vital that small businesses intending to grow show a high gross profit margin. Sales revenue is pretty easy to track but computing the cost of producing goods and/or services is what often gets miscalculated. An experienced accountant can assist you in properly computing your gross margin, operating and net profit margin and also determine how the business has performed compared to the industry.
Cost Controls & Expense Management
Businesses can have great sales figures but experience low profit margins due to excessive and out of control costs and expenses. When business budget and adhere to a spending plan then you better position the business when there is an unexpected decline in the market and remain profitable.
An accountant gives you an accurate account of your business expenses and how your expenses compare to similar companies in your industry. It’s beneficial to reduce costs and expenses where it’s feasible because this will help you with profitability.
Whether you provide a product or service accurate pricing can enhance your profits. You want to consider all of the costs in your pricing model as well as the value you provide to customers. You don’t want to use a low-price strategy simply to drive volume because that won’t translate to maximum profits often times. You want to also attract your target market who are willing to pay for the value you provide. When you routinely discounting your products or services minimizes your gross margin and customers will be more sensitive to upward price adjustments in the future. If your prices are on the low end compared to industry standards, a realistic increase means greater profits. If your sales are stagnant, a slight price decrease may be required to stimulate sales. Your accountant helps you analyze your pricing and makes recommended changes to ensure you achieve maximum profits.
The road to profitability includes optimizing revenue and reducing costs. Eliminating waste and controlling costs are important as well. If you want more tips or information on our 7 Figure Accelerator Growth Formula, contact us for a free initial Strategy Session.